"Bitcoin Drops Below $40k: 'Buy the Rumor, Sell the Fact'?"

Since the launch of spot ETFs, Bitcoin has fallen nearly 20% from its recent high, with continued selling pressure in the market?

Since the first batch of spot exchange-traded funds (ETFs) directly investing in Bitcoin was launched on January 11, the price of Bitcoin has fallen nearly 20%, partly because speculators have become more cautious about the potential impact of Bitcoin products, while the volume of sales remains large.

On the day the Bitcoin spot ETFs issued by BlackRock and Fidelity Investments were listed, the price of Bitcoin once soared to $49,021. However, as of Tuesday, Bitcoin broke through $40,000 per coin for the first time since December 4 last year, a 19% drop from its previous high.

Nine new U.S. Bitcoin spot funds began trading on January 11, and the $22 billion Grayscale Bitcoin Trust (GBTC) transitioned from a closed structure to an ETF.

Advertisement

Eric Balchunas, a senior ETF analyst at foreign media, wrote that these ETFs inflow $1.2 billion in the first six days after listing.

Balchunas said that most of the inflow of funds went to BlackRock's iShares Bitcoin Trust and Fidelity's Wise Origin Bitcoin Fund, while Grayscale had an outflow of $2.8 billion. Among the sellers were the "legacy" of the bankrupt cryptocurrency exchange FTX, which sold most of its shares in Grayscale.

It is reported that FTX has sold its holdings of 22 million shares, worth nearly $1 billion, reducing FTX's ownership of GBTC to zero.

A team led by J.P. Morgan analyst Nikolaos Panigirtzoglou pointed out in a report that if investors in GBTC continue to take profits, the price of Bitcoin may face further downward pressure in the next few weeks.

Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors LLC, wrote in a report:

"In the past two weeks, Bitcoin has been challenged by a more severe macro environment, with rising interest rates and a stronger dollar as evidence, in addition to the huge selling pressure from traders closing Bitcoin arbitrage positions and the sale of FTX's bankrupt assets."JPMorgan estimates that outflows from GBTC could reach as high as $3 billion. Additionally, the bank also believes that GBTC's current fee rate of 1.5% is too high compared to other spot Bitcoin ETFs, which may also have brought considerable selling pressure.

However, Farrell added that the selling by FTX may eliminate the oversupply, suggesting that "the strong selling pressure from GBTC may soon subside."

Bitcoin soared nearly 160% last year, outperforming traditional assets such as stocks, and there was speculation that the approval and listing of spot ETFs would prompt a broader adoption of the cryptocurrency by institutional and individual investors. However, since the beginning of this year, the token has been falling and has lagged behind the global market.