Recent events in the cryptocurrency world have led to significant changes in investor sentiment. Particularly influenced by statements from Federal Reserve Chairman Jerome Powell.
Reasons for Changes in Crypto Market Sentiment
Last week was tumultuous for the crypto market. Bitcoin fell nearly 10% due to deteriorating inflation indicators, creating a sense of instability. Additionally, significant outflows from Bitcoin spot ETFs confirmed the caution among institutional investors. These events shaped a prevailing negative sentiment in the market. However, after Powell's speech, this sentiment changed as he hinted at a more cautious approach to monetary policy.
Short Squeeze and Market Recovery
Following the unexpected shift in pressure, the market reacted swiftly and powerfully. A strong short squeeze occurred, catching many bearish traders off guard. This led to a significant rise in prices for many cryptocurrencies, including Bitcoin and Ethereum, demonstrating the market's sensitivity to macroeconomic signals.
Outlook for Crypto Market Sentiment
Despite the recent recovery, attention should be paid to continued outflows from ETFs. According to the Bitfinex Alpha report, Bitcoin spot ETFs experienced a net outflow of $1.18 billion last week, indicating ongoing caution from institutional investors. Bitcoin is expected to remain within a range in the coming weeks, while altcoins may see limited movement until more institutional capital flows into the market.
The cryptocurrency market has showcased a significant shift in sentiment in light of recent events. However, capital outflows and caution from institutional investors remain key factors. A period of consolidation is expected in the coming weeks, and sustainable growth will require new capital inflows.
