Bitcoin’s Rollercoaster: Unraveling the Impact of ETF Launch on Prices

Since the launch of the first exchange-traded funds (ETFs) investing directly in Bitcoin on January 11, the cryptocurrency has experienced a notable 20% decline.

The initial spike saw Bitcoin reaching $49,021 on the day when ETFs from major issuers like BlackRock Inc. and Fidelity Investments became operational. As of 6:03 a.m. Tuesday in London, Bitcoin is trading at $39,990, reflecting an 18% drop from the intraday peak.

On January 11, nine new US spot Bitcoin funds commenced trading, while the $22 billion Grayscale Bitcoin Trust (GBTC) transformed from a closed-ended structure into an ETF. During the first six days, there was a net inflow of $1.2 billion into the group, with BlackRock’s iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund receiving the majority of the influx. In contrast, $2.8 billion exited the Grayscale fund, notably due to the estate of the bankrupt crypto exchange FTX selling the majority of its shares in the Grayscale vehicle.

The past two weeks have presented challenges for Bitcoin, influenced by tougher macroeconomic conditions, rising interest rates, and a stronger dollar. Traders unwinding their GBTC arbitrage positions and the FTX bankruptcy estate offloading assets have contributed to significant selling pressure on Bitcoin, according to Sean Farrell, Head of Digital-Asset Strategy at Fundstrat Global Advisors LLC. The disposals by FTX could potentially alleviate supply concerns, hinting that the intense selling pressure from GBTC may soon ease.

Bitcoin, which surged nearly 160% last year, has been under pressure since the beginning of the year, trailing global markets. Despite the decline, there is anticipation that normalization in the market dynamics, particularly with GBTC outflows, is necessary for true price discovery, as noted by Leah Wald, CEO of digital-asset investment firm Valkyrie Investments.


Disclaimer: Not Investment Advice

it’s crucial to understand that the information provided here is not to be construed as investment advice. The crypto market is dynamic and highly speculative, and decisions should be made based on thorough personal research and consideration of individual risk tolerance. Always consult with financial professionals and conduct your own due diligence before making any investment decisions. The intention of this exploration is to present insights and trends, not to provide specific investment recommendations.

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