Okay, now – time for an autopsy: how did this happen?
Well, on Monday, US Bitcoin ETFs saw a net outflow of $65 million, ending a 19-day streak of inflows. This pushed the Bitcoin price down – because if there are more sellers than buyers, the price drops to meet that lower demand.
What started it?
The sell-off was caused by nervousness in the market around the current (yet to be announced) inflation figures.
Because if the data shows that inflation is not falling at the expected pace, the Federal Reserve will keep interest rates high for longer.
(Making our loan/credit repayments higher → which makes us spend less → which hurts the economy → which hurts stock/crypto prices).
Good news is:
A higher-than-expected inflation report is now partly priced into the market. So if inflation does indeed run high, the worst of the sell-off could be behind us.
Better yet, if inflation appears to have subsided, the market may recover!