Bitcoin (BTC) Experiences Almost 20% Price Decrease After ETF Launch: Is it Wise to Seize the Opportunity and Purchase?
Bitcoin has encountered a recent decline, losing nearly 20% of its value since the introduction of the first exchange-traded funds (ETFs) that directly invest in the cryptocurrency on January 11. On the day the ETFs were launched, including those from BlackRock Inc. and Fidelity Investments, the digital asset initially surged to $49,021. However, it is currently trading at $39,718, marking a 19% decrease from its highest point of the day.
In addition to this, nine new US spot Bitcoin funds were recently launched, and the $22 billion Grayscale Bitcoin Trust (GBTC) transformed into an ETF on January 11. Within the first six days, these funds collectively attracted a net inflow of $1.2 billion, according to Eric Balchunas, a Senior ETF Analyst at Bloomberg Intelligence.
It is worth noting that the iShares Bitcoin Trust from BlackRock and the Fidelity Wise Origin Bitcoin Fund received the majority of new investments, while $2.8 billion was withdrawn from the Grayscale fund. The selling activity included a significant portion from the bankrupt crypto exchange FTX, which sold off most of its shares in the Grayscale vehicle.
When analyzing the challenges faced by Bitcoin, Bloomberg analysts point to weak financial conditions such as higher interest rates, a stronger dollar, and significant selling pressure. The selling pressure is a result of traders closing out their GBTC arbitrage bets and the FTX bankruptcy estate selling off assets. Sean Farrell, the Head of Digital-Asset Strategy at Fundstrat Global Advisors, believes that the FTX sales could reduce oversupply, ultimately leading to less intense selling pressure on GBTC.
While Bitcoin experienced an impressive 160% surge in the previous year, outperforming traditional assets, its performance has faltered since the beginning of this year, trailing behind global markets. Despite this setback, the introduction of ETFs was expected to encourage wider adoption of cryptocurrencies by both institutional and individual investors.
Interestingly, the report also highlights that other cryptocurrencies, including Ether and BNB, faced challenges in Asia on the same day. Bitcoin, being the largest digital asset, is currently trading at approximately $30,000 below its record high of nearly $69,000, which was reached during the pandemic in 2021.
Looking ahead, the outlook for Bitcoin in 2024 remains bullish. The introduction of new spot Bitcoin ETFs and an upcoming halving event are expected to create long-term demand and reduce selling pressure. Anticipated interest rate cuts by the Federal Reserve in 2024 suggest improved liquidity conditions, aligning with rising demand and falling supply, which is a favorable combination for Bitcoin.
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Bitcoin, Price Analysis