Bitcoin has fallen more than 20% since the January 11 launch of the first exchange-traded funds investing directly in the token, as speculators grow more cautious about the products’ potential impact.
The digital asset rose to $49,021 on the day when ETFs from issuers including BlackRock Inc. and Fidelity Investments went live. Bitcoin was trading at $38,860 as of 6:20 a.m. Tuesday in New York, a 20.7% drop from that intraday peak.
“As bearish sentiment appears to prevail, the next crucial price levels for bitcoin that could provide support are estimated to be between $38,000 and $36,000,” analysts at crypto exchange Bitfinex wrote in a Tuesday note.
Nine new US-based Bitcoin funds began trading on January 11, as the $22 billion Grayscale Bitcoin Trust — or GBTC — converted from a closed-end structure into an ETF. A net $1.2 billion flowed into the group in the first six days, Bloomberg Intelligence Chief ETF Analyst Eric Balchunas wrote on X.
BlackRock’s iShares Bitcoin Trust and the Fidelity Wise Origin Bitcoin Fund garnered most of the inflow, while $2.8 billion came out of the Grayscale fund, Balchunas said. Among the sellers was the estate of bankrupt crypto exchange FTX, which disposed of the majority of its shares in the Grayscale vehicle.
“Over the past two weeks, Bitcoin has been challenged by tougher macro conditions – evidenced by picking up rates and a strengthening dollar – and significant selling pressure from traders unwinding their GBTC arbitrage positions along with the FTX bankruptcy estate offloading assets,” Sean Farrell, boss of digital-asset strategy at Fundstrat Global Advisors LLC, wrote in a note.
The removal of FTX may eliminate a supply glut, suggesting that GBTC’s “intense selling pressure may soon subside,” Farrell added.
Bitcoin has surged nearly 160% in the past year, outperforming traditional assets such as stocks, amid speculation that the ETFs would catalyze broader adoption of the cryptocurrency by institutional and individual investors. The token has been retreating since the turn of the year and follows global markets.
Tokens such as Ether and BNB also fell sharply along with Bitcoin, the largest digital asset, which is about $30,000 below its 2021 pandemic-era record of nearly $69,000.
“GBTC outflows have created a dynamic in the market that needs to be normalized before we see real price discovery,” said Leah Wald, CEO of digital investment firm Valkyrie Investments.
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Published: 23 Jan 2024, 18:05 IST