3 Reasons Why Crypto Market is Down Today

NAIROBI (CoinChapter.com) — The cryptocurrency market experienced a decline today, with major assets like Bitcoin and Ethereum registering losses. The drop aligns with a surge in the US dollar index and reports of Binance Labs selling investment tokens, which appear to be weighing on global crypto sentiment.

The global crypto market cap currently stands at $2.52 trillion, reflecting a 4.04% decrease over the last 24 hours. Despite this bearish sentiment, several major cryptocurrencies managed to buck the overall downtrend. Bitcoin (BTC) posted a 3.57% gain, while Ethereum (ETH) rallied 4.46% higher. BNB also saw a 4.06% upswing amidst the volatile conditions.

Rising Dollar Index Weighs on Crypto Market

The day’s crypto market slump can be partly attributed to the unexpected expansion of U.S. factory activity in March. This economic data strengthened the U.S. dollar index, which measures the greenback’s value against a basket of major currencies.

The dollar index soared past 105, marking a peak unseen in four months, while Bitcoin dipped below $66,500 amid a shift towards the strengthening dollar. A rising dollar typically dampens demand for dollar-denominated assets like Bitcoin, making them less appealing to global investors.

Reduced Bets on Fed Rate Cuts Dampen Crypto Outlook

Following the release of the March 2024 ISM Manufacturing Index, which surprisingly hit 50.3, indicating expansion in factory activity for the first time since 2022, the crypto market experienced a downturn. This data, signaling stronger-than-expected economic health, has led to a reassessment of the Federal Reserve’s monetary policy trajectory.

Previously, bond traders had anticipated more aggressive rate cuts from the Fed within the year. However, the strength shown in the manufacturing sector suggests a possible delay in these cuts, impacting investor sentiment towards assets like cryptocurrencies.

As a direct consequence, the pricing of Fed rate cuts in swap contracts adjusted significantly, dropping to fewer than 65 basis points for the year, less than what Fed policymakers had forecasted.

This shift in expectations contributed to a sharp increase in Treasury yields across the board, with two- to 30-year yields rising by roughly 10 or more basis points on the day. Such movements underscore the bond market’s sensitivity to changes in monetary policy outlooks and have a cascading effect on the crypto market.

Bitcoin ETF Outflows Compound Selling Pressure

The bearish sentiment in the crypto market was further compounded by significant outflows from Bitcoin exchange-traded funds (ETFs). SpotOnChain data revealed a net outflow of 88 million dollars from Bitcoin ETFs on April 1st, 2024.

The Grayscale Bitcoin Trust (GBTC) alone experienced a staggering single-day outflow of $302.6 million, amplifying the selling pressure on the world’s largest cryptocurrency. This exodus from Bitcoin ETFs highlights institutional investors’ growing bearish stance toward the crypto market amid heightened macroeconomic uncertainty.

As the crypto market navigates these turbulent waters, investors will closely monitor developments in the broader economic landscape. Factors such as monetary policy decisions, inflation data, and geopolitical tensions will likely continue to influence the trajectory of digital assets in the coming days and weeks.