Bitcoin slumped to its lowest point since mid-December as the speculative fervor fueled by anticipation of new exchange-traded funds subsided, resulting in the cryptocurrency being in negative territory since the beginning of 2024. The largest digital asset flirted with dropping below $40,000 before settling at $40,843 by 11:40 a.m. on Friday in Singapore, marking a 4% decline in the past 24 hours. Other smaller tokens, including Ether, Solana, and Polkadot, faced similar challenges.
Last year, Bitcoin experienced a remarkable 157% surge, driven by optimism surrounding the anticipated launch of the first US exchange-traded funds directly holding the token on January 11. Additionally, digital assets benefited from expectations of looser monetary policy. Traders are now evaluating the level of capital attracted by the ETFs and readjusting their expectations for potential interest-rate cuts.
Greg Moritz, co-founder at the crypto hedge fund AltTab Capital, noted, “This type of correction after a significant run-up is normal for Bitcoin.”
Nine new spot Bitcoin ETFs were launched last week, including offerings from BlackRock Inc. and Fidelity Investments. The Grayscale Bitcoin Trust, with a value of $25 billion, transitioned from a closed-ended structure to an ETF.
BlackRock’s iShares Bitcoin Trust has seen over $1 billion in investor inflows, while the Fidelity Wise Origin Bitcoin Fund has attracted around $880 million. In contrast, Grayscale’s Bitcoin fund, established in 2013, has witnessed approximately $1.6 billion in outflows since transitioning to ETF trading.
The Grayscale fund traded at a discount to its underlying holdings last year when operating as a closed-ended vehicle, prompting some to speculate on the narrowing of the gap. However, speculators may now be exiting this trade as the discount has all but disappeared.
Crypto investor Meltem Demirors highlighted the significance of Grayscale Bitcoin Trust (GBTC) selling, stating, “GBTC selling, that’s the story.” She noted that shares in the fund have been “pledged as collateral or used to repay bad loans” in the context of insolvencies within the crypto sector.
