Bitcoin Plunge: FTX's Collapse Comparison Sparks Fear in Crypto Community

BTC Suffers Largest Single-Day Drop Since FTX Bankruptcy

Bitcoin's value took a significant hit on Tuesday, with spot BTC ETFs experiencing substantial outflows. The leading cryptocurrency plummeted over 8% to below $62,000, marking its most substantial single-day decline since November 9, 2022. This downward trend is reminiscent of the crash triggered by the collapse of Sam Bankman Fried's FTX exchange.

The current pullback, amounting to a 15% decrease from last week's record highs, is causing concern among investors. Analysts attribute this decline to various factors, including the substantial outflows from spot ETFs, as highlighted by provisional data from Farside.

Trader and economist Alex Kruger outlined the primary reasons for the crash, citing excessive leverage, Ethereum's influence on the market, negative BTC ETF inflows, and speculative frenzy around Solana.

Ethereum Price Declines Amid Dimming Prospects for SEC-Approved Spot ETF, Focus on Fed Rate Decision

Ether (ETH), the second-largest cryptocurrency, also faced a downturn, dropping from around $4,000 to $3,130 following last week's Dencun upgrade. One contributing factor to ETH's decline is the diminishing likelihood of the U.S. SEC approving an ether spot ETF by May.

Moreover, the crypto market's overheated conditions, particularly evident in the significant leverage used by long traders in perpetual futures bets, have raised concerns about a potential market correction.

Investors are now turning their attention to the Federal Reserve's rate decision scheduled for Wednesday, which will be followed by Chairman Jerome Powell's press conference. The decision and subsequent statements may provide insights into the Fed's stance on potential rate cuts amidst a strong economy and persistent inflation.

The recent uptick in the dollar index and U.S. Treasury yields, driven by inflationary pressures, has dampened the appeal of risk assets, including cryptocurrencies. This shift in sentiment reflects growing apprehension among investors in emerging technologies amid broader market uncertainties.