Bitcoin's 98% long squeeze liquidates over $25 million, causing a rapid price drop below $30,000

Bitcoin (BTC) experienced a drop of more than 3% in just 15 minutes during European morning hours on Wednesday, taking the largest cryptocurrency by market capitalization below $30,000. It further declined to as low as $29,000, according to CoinDesk data. The sell-off did not appear to have an immediate fundamental reason, but an unusually large sell order on crypto exchange Binance and a higher-than-expected U.K. March inflation figure of over 10% may have influenced market sentiment.

Paolo Ardoino, the chief technology officer of Tether, the largest stablecoin by market capitalization, said that while the motto of crypto is "we are going to replace the banks," the industry is not there yet, and it may never reach that point. Major banks, such as JPMorgan Chase, Bank of New York Mellon, and ING, are turning most potential crypto-related customers away or working only with top-tier firms. These banks' policies have remained largely unchanged historically, with many citing the heightened money-laundering risk in the crypto sector and a lack of robust regulation as reasons for their caution.

Some large cryptocurrency companies, like Circle and Gemini, have ongoing relationships with U.S. banks, but securing a banking partner for smaller crypto startups can be challenging, according to Ricardo Mico, the U.S. CEO of Banxa, a payment and compliance infrastructure provider for crypto. Mico noted that there is a concern about the lack of banking partners available in the market, particularly for smaller and less-proven ventures.

The broader crypto market has also been affected, with Ether (ETH), Polygon (MATIC), Dogecoin (DOGE), and Solana (SOL) falling in the past 24 hours. Crypto firms have been left scrambling to find banking partners following the collapse of three crypto-friendly lenders in the U.S. last month, leading to concerns that their business will become concentrated in smaller financial institutions.

U.S. regulators have advised banks to be vigilant of liquidity risks arising from crypto-related deposits, which could be subject to rapid outflows if customers try to redeem their crypto assets for real money. Mainstream banks have become increasingly wary of crypto clients after a series of high-profile collapses and a lack of regulation.

Marcus Foster, head of crypto policy at Coadec, a body representing U.K. startups, said that crypto and Web3 startups are struggling to get a business bank account, with the issue becoming "significantly worse" recently. U.S. regulators are also concerned about the safety and soundness of bank business models that are highly focused on crypto clients, following the implosion of Silvergate Capital Corp, Signature Bank, and Silicon Valley Bank.

Joel Kruger, market strategist at LMAX Group, believes that the pullback in the crypto market is more a function of an overdue correction following impressive moves and possible profit-taking on broader risk-off flow in global markets than anything specific to cryptocurrencies.