Cryptocurrency Market Faces Decline as Ether ETF Approval Triggers “Sell the News” Sentiment

The cryptocurrency market experienced a significant drop in net capitalization, falling by over 4.50% in the past 24 hours to reach $2.414 trillion on May 24. Leading this decline are top coins, Bitcoin (BTC) and Ether (ETH), which have both dropped by around 3.5% and 4%, respectively.

This downturn comes on the heels of the U.S. Securities and Exchange Commission’s (SEC) approval of eight Ether exchange-traded funds (ETF), triggering a “sell-the-news” sentiment among traders. Crypto analyst Zach Rynes suggests that the market had already priced in the approval, with Ether surging 20% earlier in the week.

However, the actual launch of these ETFs is pending further regulatory steps, including the approval of S-1 filings. This delay has dampened short-term buying sentiment in the market, leading to a decline in prices. Despite this, Rynes anticipates a “massive capital inflow” once the Ether ETF commences.

The recent drop in the crypto market has also been linked to significant liquidations in the derivatives market, totaling over $376.63 million. Long liquidations accounted for nearly $295.73 million of this amount, as traders were forced to sell their positions to prevent further losses.

Additionally, the release of the Federal Open Market Committee’s (FOMC) minutes from their April meeting on May 22 has added pressure on risk-on assets, including cryptocurrencies. The minutes revealed policymakers’ concerns about the timing for easing monetary policy, leading to a rise in Treasury yields and expectations of tighter monetary policy.

Overall, the combination of regulatory uncertainty, liquidations in the derivatives market, and concerns about monetary policy has contributed to the recent decline in the cryptocurrency market. Investors are advised to conduct their own research and exercise caution when making investment decisions in this volatile market.