What crashed Bitcoin? Three theories behind BTC’s trip below $60K

Bitcoin’s recent sharp correction, which saw the price breach the crucial psychological and technical support level of $60,000, triggered widespread panic and liquidated billions in leveraged positions. While market corrections are a natural component of any risk asset cycle, the speed and severity of this particular drop below a key support level necessitate investigation. Here are three primary theories explaining the sudden decline.

### Theory 1: The ‘Higher-for-Longer’ Macroeconomic Stance

The most pervasive force impacting Bitcoin’s valuation remains the global macroeconomic climate, primarily driven by the U.S. Federal Reserve’s interest rate policy. As inflation proves stickier than anticipated, the Fed has maintained its ‘higher-for-longer’ interest rate narrative. High interest rates significantly reduce market liquidity and make non-yielding assets, like Bitcoin, less appealing compared to safer fixed-income returns. Institutional investors, who drove much of the Q1 2024 price surge, become increasingly risk-averse when the cost of capital remains elevated. This persistent pressure decreases demand for Bitcoin as a high-growth risk asset, triggering pullbacks whenever macroeconomic data suggests rates will remain restrictive.

### Theory 2: Post-Halving Miner Capitulation

Following Bitcoin’s fourth halving event, the block rewards for miners were instantaneously cut in half, drastically increasing the marginal cost of production. For less efficient, smaller, or highly leveraged mining operations, the reduced revenue streams force a difficult choice: upgrade hardware, or sell existing BTC reserves to cover operating expenses and debt. This phenomenon, often referred to as ‘miner capitulation,’ injects significant selling pressure into the market. Data tracking miner outflows frequently shows spikes in BTC transfers to exchanges in the weeks following a halving, coinciding with price dips, as these entities are forced sellers to maintain solvency or liquidate assets.

### Theory 3: Institutional ETF Outflows and Cascade Liquidations

Institutional flows, particularly through U.S. spot Bitcoin Exchange-Traded Funds (ETFs), have become a dominant factor in short-term BTC price action. The period leading up to the crash below $60K was characterized by several days of net outflows from major Bitcoin ETFs. This signals a broad retreat by large institutional buyers, effectively eliminating a primary source of consistent demand. Compounding this sell-off were cascade liquidations in the derivatives market. As the price approached and broke the $60,000 threshold, massive amounts of highly leveraged long positions were automatically closed (liquidated). These forced sales add further momentum to the downside, turning a slow institutional retreat into a rapid, volatile price crash.

Source: What crashed Bitcoin? Three theories behind BTC’s trip below $60K