Bitcoin experienced its longest losing streak in about a month following the approval of spot Bitcoin (BTC) ETFs by the US Securities and Exchange Commission.
The cryptocurrency, known for its high volatility, is currently trading relatively unchanged at $42,655. This recent decline is the lengthiest losing streak for Bitcoin since mid-December, leaving investors uncertain about its short-term direction.
The catalyst for this market turbulence was the introduction of nearly a dozen US exchange-traded funds (ETFs) focused on cryptocurrencies, including offerings from investment giants BlackRock Inc. and Fidelity Investments. Despite the initial surge to a two-year high above $49,000, the enthusiasm quickly waned, and Bitcoin retraced its steps.
Market analysts attribute this price action to a classic “buy-the-rumor, sell-the-fact” reaction. Tony Sycamore, a market analyst at IG Australia Pty, suggests chart patterns indicate a potential slide to the $38,000 to $40,000 range for Bitcoin. The excitement over the ETFs had likely been priced into the market, prompting some investors to engage in profit-taking.
Bitcoin supporters view these US spot ETFs as a significant milestone for the cryptocurrency, providing increased access for institutional and retail investors. However, skeptics point to the challenges cryptocurrencies faced in 2022, marked by a deep crash and subsequent bankruptcies, raising concerns about broader adoption.
Despite the recent decline, new US spot funds received a net inflow of $819 million over the first two days of trading, with significant investments in BlackRock’s iShares Bitcoin Trust and the Fidelity Wise Origin Bitcoin Fund. In contrast, the largest Bitcoin fund, the $26 billion Grayscale Bitcoin Trust, saw $579 million in outflows after converting into an ETF the previous week.
Noelle Acheson, author of the Crypto Is Macro Now newsletter, suggests that recent weakness in Bitcoin may be due to speculators taking profits as the discount between the Grayscale Bitcoin Trust and its holdings nearly vanished. While not all outflows from the Grayscale Bitcoin Trust were likely reinvested directly into Bitcoin, the new ETFs are expected to attract strong inflows as more sidelined money enters the market.
Despite potential short-term outflows as speculative positions unwind, the approval of spot Bitcoin ETFs is considered by some as a potential paradigm shift in the global perception and use of digital assets, according to Andrew Peel, the head of digital asset markets at Morgan Stanley.
