Bitcoin In Correction Amid Profit Taking and Fed Meeting Jitters; Crypto Stocks Tank

Bitcoin (BTC) was trading just a shade under $65,000 Tuesday afternoon ahead of the Federal Reserve’s interest rate decision tomorrow. The sell-off spilled over to the broader crypto markets, dragging down other tokens and crypto-related stocks.

Bitcoin In Correction, Eyes On The Fed

Bitcoin is technically in a correction, which means it's trading more than 10% lower than its prior high of $73,000 set not a week ago.

And this big move in the largest cryptocurrency by market capitalization has also spilled over into Ether (ETH), Solana (SOL) and Cardano (ADA), which also saw big drops in trade.

Crypto investors are closely watching the Federal Reserve this week for clues about the timing or magnitude of an interest rate cut. Lower rates would weaken U.S. Treasury yields, making riskier assets such as cryptocurrencies more attractive to investors. However, higher rates for longer would hurt the investment case for riskier assets to some extent.

The Bank of Japan also raised rates for the first time in 14 years Tuesday, which could signal potential pressure on U.S. Treasurys. The market is also watching for the consequences of the halving next month when the price of the cryptocurrency is expected to increase.

ETFs Drove The Rally, Not The Correction

The demand for bitcoin generated by spot bitcoin ETFs, which began trading in January this year, was credited for the recent rally in the cryptocurrency's prices. Despite almost $12 billion in outflows from Grayscale's Bitcoin ETF Trust (GBTC) since the other ETFs started trading, it’s not the ETFs moving the cryptocurrency, according to Eric Balchunas, a Bloomberg Intelligence ETF analyst.

“The selling of Bitcoin began last week when there were inflows into the ETF,” he said in an interview. “This is selling that's coming from outside the ETFs. So, it’s coming from inside the crypto world.”

The selling has been steady and it’s par for the course for Bitcoin, which had a “pretty sweet ride up” from $40,000 to above $73,000.

"You can't go up at that rate that quickly that long,” Balchunas said.

Crypto-Related Stocks Feel The Heat

MicroStrategy (MSTR) stock tanked by as much as 16% Tuesday before gaining back some of those losses after the company disclosed the details of its most recent bitcoin buying spree.

It added roughly 9,245 bitcoins for approximately $623 million in just seven days ending March 18, using money it raised via a bond offering as well as about $30 million of extra cash. The average price for the entire purchase was $67,382 per bitcoin. It now holds about 214,246 bitcoins or roughly 1% of bitcoins that can exist with the supply capped at 21 million.

The bitcoin halving event in April could be a negative for bitcoin miners as it will make it harder for them to earn money. And some miner stocks are already feeling the heat. Marathon Digital (MARA), Riot Blockchain (RIOT) and Cleanspark (CLSK) dropped in trading. Crypto trading platforms Coinbase (COIN) and Robinhood (HOOD) were also trading lower.