Is the grand Crypto Rally of 2023 to 2024 coming to a close? That’s a plausible thought this week, given the noticeable descent in the prices of both leading cryptocurrencies and altcoins.
Even some of the once-prominent and upward-trending altcoins faced a setback. Cardano $ADA experienced a 9% drop, as reported by figures from the crypto-exchange operator Coinbase. According to S&P Global Market Intelligence data, counterparts Arbitrum $ARB and Ethereum Classic $ETC suffered more substantial declines, plummeting by 18% and 15%, respectively.
The buzz surrounding spot crypto ETFs has waned
While the adage “buy the rumor, sell the news” doesn’t always hold true in the world of investments, it undeniably influenced the decline of Cardano and its counterparts this week. Towards the end of last year, excitement grew around spot cryptocurrency exchange-traded funds (ETFs), reaching its peak when the Securities and Exchange Commission (SEC) approved a total of 13 of them for trading last week.
Why was the market so captivated by these seemingly mundane assets? Despite their unassuming name, spot crypto ETFs represent a significant development in crypto investing. Prior to their introduction, the most effective way to hold digital coins and tokens was through direct ownership.
Traditional investments like stocks were much simpler to buy, sell, and hold—all an investor needed was a brokerage account. With this, transactions could occur almost instantly, with the broker acting as a custodian for their assets.
However, cryptocurrencies presented a different challenge. Direct ownership meant setting up digital wallets, requiring careful maintenance. Instances of investors with substantial holdings forgetting wallet passwords, unable to recover them, became a nightmare scenario—being locked out of assets worth thousands, millions, or even billions.
Spot crypto ETFs, currently holding only Bitcoin, are streamlined instruments where the ETF manager is responsible for direct ownership of the coins or tokens. The onus of managing digital wallets falls on the company, not the investor. The latter simply purchases the ETF as a security traded on an exchange, similar to an index fund or stock.
A momentary pause in the market
This pattern is familiar—we witness excitement building around a new product or service in the investing scene, and once it arrives, the market shifts its focus. The escalating enthusiasm over spot crypto ETFs wasn’t the sole factor propelling the rise of Bitcoin and altcoins; an improving economic climate and the promise of Federal Reserve key interest-rate cuts also played significant roles.
Now that spot crypto ETFs are a reality and there’s no major, sharply favorable economic news, it appears investors are cashing in on some coin and token holdings. The market is taking a breather, and for many participants, this seems to be an opportune time to do so.
