Inverstorcrypto.net - The recent approval of Ether spot ETFs in the US has sparked a "sell-the-news" reaction among crypto traders.
Meanwhile, the decreasing likelihood of a Fed interest rate cut is further intensifying selling pressure. The net market capitalization of the cryptocurrency market has dropped by more than 4.50% in the last 24 hours, reaching $2.414 trillion on May 24th.
Leading these losses are top coins, with Bitcoin (BTC) seeing a decrease of $67,391 and Ether (ETH) falling by $3,718, each dropping around 3.5% and 4% respectively.
Crypto market losses occurred just one day after the US Securities and Exchange Commission (SEC) approved eight Ether exchange-traded funds (ETFs), indicating an increasing "sell-the-news" sentiment among traders.
This counterintuitive reaction occurred as investors often buy in anticipation of news, driving up prices beforehand. Crypto analyst Zach Rynes stated that the market had already anticipated the approval, with Ether surging 20% this week and causing the overall crypto market to rise by 5%.
Furthermore, the actual launch of these ETFs is still pending further regulatory steps, including the approval of the S-1 filing detailing the financials and risks of the offering company.
The amended VanEck S-1 filing is currently under SEC review, although the process could take weeks to months. This delay is dampening short-term buying sentiment in the crypto market. Nevertheless, Rynes anticipates a "surge of massive capital inflow," potentially in the billions, once the Ether ETFs commence trading. The approval of the Ether ETFs triggered a $378 million crypto liquidation.
The recent crypto market downturn in the last 24 hours is related to significant liquidations in the derivatives market, totaling over $376.63 million.
Of this amount, nearly $295.73 million consisted of long liquidations. A long position is a bet that the price of an asset will rise. When the price falls instead, traders or brokers are forced to sell that position to prevent further losses. These forced sales increase selling pressure in the market, pushing crypto prices lower.
The initial price drop triggered a series of liquidations, reinforcing the overall market decline. The FOMC meeting minutes influenced risky assets.
The recent crypto market downturn followed the release of the Federal Open Market Committee's (FOMC) minutes from the April 30-May 1 meeting on May 22nd. The revealed minutes highlighted policymakers' concerns about the timing of monetary policy easing.
The latest report indicates that inflation remains high despite showing signs of easing on an annual basis. The Federal Reserve targets a 2% inflation rate, but all indicators show price increases far exceeding that target.
Bond traders' bets on a potential interest rate cut in September have decreased from 51% to 49% after the release of the Fed's meeting minutes. This period coincides with the rise in yields of the 10-year US Treasury bond from 4.31% to 4.49%.
The increase in Treasury yields suggests that investors anticipate tighter monetary policies to continue, which typically result in higher borrowing costs and lower liquidity. This environment can pose challenges for risky assets, leading to a decline in the crypto market.
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