Since the launch of the first exchange-traded funds (ETFs) investing directly in Bitcoin on January 11, the digital asset has witnessed a significant drop of nearly 20%. Speculators are showing increased caution, reflecting concerns about the potential impact of these newly introduced investment products.
On the day the ETFs debuted, Bitcoin reached a peak of $49,021. However, as of 8:33 a.m. Tuesday in Singapore, the cryptocurrency was trading at $39,718, marking a 19% decline from the intraday high.
The introduction of nine new US spot Bitcoin funds on January 11, along with the conversion of the $22 billion Grayscale Bitcoin Trust (GBTC) from a closed-ended structure into an ETF, attracted a net flow of $1.2 billion into the group within the first six days, according to Bloomberg Intelligence’s Senior ETF Analyst Eric Balchunas.
Notably, BlackRock’s iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund saw the majority of inflows, while $2.8 billion exited the Grayscale fund. The Grayscale fund witnessed selling pressure, with the estate of the bankrupt crypto exchange FTX offloading a significant portion of its shares in the Grayscale vehicle.
Bitcoin faced challenges in the past two weeks due to tougher macroeconomic conditions, including rising interest rates and a strengthening dollar. Additionally, significant selling pressure resulted from traders unwinding their GBTC arbitrage positions and the FTX bankruptcy estate divesting assets, as noted by Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC.
The recent disposals by FTX could potentially alleviate a supply overhang, indicating that the intense selling pressure from GBTC may soon subside, Farrell suggested.
Bitcoin had a remarkable surge of almost 160% in the previous year, outperforming traditional assets. The anticipation that ETFs would encourage broader adoption of the cryptocurrency by institutional and individual investors fueled this growth. However, the token has been experiencing a retreat since the beginning of the year, trailing behind global market trends.
Other tokens like Ether and BNB also faced challenges in Asia on Tuesday, in conjunction with Bitcoin, which currently stands approximately $30,000 below its 2021 pandemic-era record of almost $69,000.
