Bitcoin hit a seven-week low, dropping below $40,000 for the first time since the launch of 11 spot bitcoin exchange-traded funds on January 11. The decline, down 3.98%, coincided with the cryptocurrency market facing challenges competing with traditional stocks, as the S&P 500 index reached record highs. Analysts and market-watchers attribute the dip to a variety of factors, including the SEC’s approval of bitcoin ETFs, outflows from Grayscale Investment’s bitcoin trust, and the historical pattern of Bitcoin experiencing slumps after significant crypto events.
23 January 2024 – Bitcoin experienced a notable downturn, reaching a seven-week low and dipping below $40,000 on Monday, marking its lowest level since December 4. This decline follows the recent launch of 11 spot bitcoin exchange-traded funds (ETFs) on January 11. The world’s largest cryptocurrency saw a 3.98% decrease, trading at $39,938.00, while the second-largest cryptocurrency, Ether, also faced a 6.37% drop to $2,328.30.
Bitcoin had previously rallied, fueled by anticipation that the U.S. Securities and Exchange Commission (SEC) would approve bitcoin ETFs, potentially attracting a wave of new investors. The cryptocurrency had seen a remarkable 70% gain since August, triggered by a federal court decision compelling the SEC to review its rejection of Grayscale Investment’s bitcoin ETF application.
Analysts had anticipated a partial correction of these gains, but some attributed Bitcoin’s current struggles to its difficulty competing with traditional stocks. On Monday, the S&P 500 benchmark index achieved fresh record highs, primarily driven by semiconductor and other tech stocks.
Antoni Trenchev, co-founder of crypto lender Nexo, expressed the sentiment that Bitcoin investors seem to be facing challenges amid traditional financial benchmarks reaching record highs. He likened the situation to a descending escalator for Bitcoin investors, contrasting with the smoother ride traditional stocks are experiencing.
Trenchev pointed out historical patterns, stating that significant crypto events, such as the initial public offering of crypto exchange Coinbase and the launch of bitcoin futures, were followed by similar Bitcoin slumps. Additionally, Bitcoin faced pressure from outflows from Grayscale Investment’s bitcoin trust, which converted into an ETF following the SEC’s approval of other bitcoin ETF products earlier in the month.
A report by CoinDesk revealed that FTX, which experienced bankruptcy in 2022, sold 22 million shares valued at nearly $1 billion in the ETF. Trenchev expressed concerns, suggesting that spot bitcoin ETFs might be at risk of joining the “crypto hall of infamy.” – ref: Reuters
