Crypto Market Faces Second-Worst Weekly Decline of 2024 Amid Cooling Demand for Bitcoin ETFs and Policy Uncertainty

The crypto market is facing a turbulent time as losses continue to mount following the second-worst weekly decline of 2024. Bitcoin, the leading token by market value, saw a significant drop of 8.1% to $58,528 on Monday, marking the biggest intraday decline since April 13. This decline is attributed to cooling demand for Bitcoin exchange-traded funds and uncertainty over monetary policy.

In the past two weeks, there have been outflows from exchange-traded products holding the cryptocurrency, totaling more than $210 million. Additionally, more than $210 million worth of bullish bets in crypto were liquidated in the past 12 hours, according to data compiled by tracker Coinglass.

The overall digital asset market has also been affected, with a gauge of the largest 100 digital assets falling about 5% in the seven days through Sunday, the steepest such slide since April.

Adding to the selling pressure is the announcement from the rehabilitation trustee of Mt. Gox, the Japanese crypto exchange that was hacked over a decade ago, that repayments of Bitcoin and Bitcoin Cash will begin in July. This news has led to market participants positioning themselves short, according to Stefan von Haenisch, head of trading at OSL SG Pte.

The uncertainty in the crypto market comes at a time when there are doubts about the Federal Reserve’s ability to quickly cut interest rates from a two-decade high. Analysts see the retreat in digital assets as a warning sign for broader risk appetite.

Despite the challenges, fund companies are preparing to launch the first US ETFs investing directly in Ether, the second-ranked cryptoasset. However, Ether and Solana have seen a run of weekly declines, with Ether experiencing its longest decline since last year and Solana since 2022.

Bitcoin, which hit a record high of $73,798 in March, is now trailing traditional investments such as stocks, bonds, and gold this quarter. The 200-day moving average at around $57,500 is now seen as a possible zone of support for the price.

Overall, digital asset products saw around $600 million in outflows for a second consecutive week, the most over a two-week period since the US approved exchange-traded funds to hold the largest cryptocurrency in January. The market is facing a bearish mood, with difficulties in digesting large sell orders, according to Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets.

The current state of the crypto market is characterized by low volatility, soft volumes, and unbalanced orderbooks, according to David Lawant, research head at FalconX. The market is struggling to catch a bid at the moment, as investors navigate through the uncertainties and challenges facing the digital asset space.