What Caused the Bitcoin Price to Fall Below $41k?
Bitcoin (BTC) experienced a significant decline of 4.5%, reaching a one-month low at $40,800 on Thursday. This drop is consistent with the broader trend seen in the CoinDesk 20 Index, which shows a 4.6% decline in the past 24 hours.
Following the approval of new spot Bitcoin ETFs on January 11, there was initially a surge in Bitcoin’s value. However, this excitement quickly faded, resulting in a notable 13% decrease in the cryptocurrency’s price.
While there have been substantial inflows into the new spot Bitcoin ETFs, there have also been significant outflows, particularly from Grayscale’s GBTC. This movement of funds in opposite directions adds complexity to the overall market situation.
According to recent data, the new spot ETF issuers collectively acquired over 68,000 bitcoins during their first week of trading. On the other hand, GBTC experienced an outflow of about 40,000 bitcoins during the same period. This resulted in a net addition of approximately 28,000 bitcoins to Bitcoin ETFs.
A prominent analyst, Vetle Lunde from K33 Research, highlighted the global context, noting that various spot Bitcoin products were already trading worldwide even before U.S. regulatory approval. Currently, there are more than 864,000 bitcoins in these global investments, and the new U.S. investments are relatively small compared to the rest of the world.
In addition to people leaving Grayscale’s GBTC, investors in Canada and Europe also withdrew money from their Bitcoin investments last week. They either made profits or chose to invest in the new U.S. offerings because they were cheaper.
Adding complexity to the situation is the ProShares Bitcoin Strategy ETF (BITO), which, despite not holding any Bitcoin, manages over $2 billion in assets under management. Although it doesn’t own bitcoins, it has a significant impact on the Bitcoin market. Lunde stated that these types of investments now account for 48% of the total interest in Bitcoin.
As investors withdraw their money from investments like BITO, there may be additional pressure to sell certain Bitcoin-related assets. This could potentially cause further short-term price drops for Bitcoin, posing challenges for the cryptocurrency.