Bitcoin has experienced a nearly 20% decline since the launch of the first exchange-traded funds (ETFs) directly investing in the cryptocurrency on January 11. The digital asset reached a high of $49,021 on the day the ETFs, issued by BlackRock Inc. and Fidelity Investments, among others, became operational. As of 6:03 a.m. Tuesday in London, Bitcoin was trading at $39,990, reflecting an 18% drop from the intraday peak.
On January 11, nine new US spot Bitcoin funds commenced trading, and the $22 billion Grayscale Bitcoin Trust (GBTC) transitioned from a closed-ended structure to an ETF. During the initial six days, the group witnessed a net inflow of $1.2 billion, according to Bloomberg Intelligence’s Senior ETF Analyst Eric Balchunas.
Most of the inflow was directed towards BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund, while $2.8 billion exited the Grayscale fund. The estate of the bankrupt crypto exchange FTX, a significant seller, offloaded a majority of its shares in the Grayscale vehicle.
Fundstrat Global Advisors LLC’s Head of Digital-Asset Strategy, Sean Farrell, noted that Bitcoin faced challenges over the past two weeks due to tougher macro conditions, including rising interest rates and a stronger dollar. Additionally, significant selling pressure resulted from traders unwinding their GBTC arbitrage positions and the FTX bankruptcy estate selling off assets.
The disposals by FTX potentially eliminate a supply overhang, leading to the belief that the “intense selling pressure from GBTC may soon subside,” Farrell added.
Bitcoin witnessed an impressive 160% surge last year, outperforming traditional assets, driven by speculation that ETFs would drive broader adoption by institutional and individual investors. However, the cryptocurrency has been retreating since the beginning of the year, trailing global markets.
Other tokens such as Ether and BNB showed minimal changes in Asia on Tuesday, alongside Bitcoin, which is currently approximately $30,000 below its 2021 pandemic-era record of almost $69,000.
Leah Wald, CEO of digital-asset investment firm Valkyrie Investments, commented, “GBTC outflows have created a dynamic in the market that needs to be normalized before we will see true price discovery.”
