Bitcoin has descended to its lowest levels since mid-December as the speculative fervor surrounding new exchange-traded funds (ETFs) has subsided, resulting in the cryptocurrency being in negative territory since the beginning of 2024.
The leading digital asset hovered near a potential drop below $40,000, trading at $40,843 as of 11:40 a.m. Friday in Singapore, reflecting a 4% decline over the past 24 hours. Other cryptocurrencies, including smaller tokens like Ether, Solana, and Polkadot, also faced challenges.
Bitcoin witnessed a remarkable 157% surge last year, driven by optimism surrounding the inaugural launch of the first US ETFs directly holding the token on January 11. Additionally, digital assets benefited from speculation about a more relaxed monetary policy. Traders are now evaluating the ETFs’ capital inflows and adjusting 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.”
The past week saw the introduction of nine new spot Bitcoin ETFs, including offerings from BlackRock Inc. and Fidelity Investments. The Grayscale Bitcoin Trust, with $25 billion in assets, transitioned from a closed-ended structure to an ETF.
BlackRock’s iShares Bitcoin Trust has attracted over $1 billion in investor inflows, while Fidelity’s Wise Origin Bitcoin Fund has seen around $880 million. Conversely, Grayscale’s Bitcoin fund, established in 2013, experienced approximately $1.6 billion in outflows since it adopted the ETF format.
Last year, the Grayscale fund traded at a discount to its underlying holdings when it operated as a closed-ended vehicle, leading some to speculate on the narrowing of this gap. However, with the discount nearly eliminated, speculators may be exiting the trade. Crypto investor Meltem Demirors highlighted the significance of GBTC selling, pointing out that shares in the fund have been used as collateral or to repay debts in the context of insolvencies within the crypto sector.
