While it is expected that the selling pressure will continue to ease as FTX is done selling its shares, large outflows from GBTC could result in further price declines in Bitcoin.
Bitcoin price is back above $40,000 after the top cryptocurrency plunged to a low of $38,550 on Tuesday following an increase in selling pressure. With several altcoins on the upswing, crypto’s total market cap has recovered by over $30 billion since the price drop and now stands at $1.55 trillion.
Bitcoin underwent a relatively tame spike in price following the highly-anticipated approval of 11 spot Bitcoin Exchange Traded Funds (ETFs) by the United States Securities and Exchange Commission (SEC) on January 10. The digital asset settled around $43,000 for about a week before beginning a steady decline this past weekend that culminated in a dip to $40,000 on Monday. By Tuesday, Bitcoin was at a 7-week low of $38,550. This translated into a $10,000 drop from the peak of $49,000 reached on January 11 when the spot BTC ETFs hit exchanges.
According to CoinMarketCap data, Bitcoin is now trading at $40,070, up 3% over 24 hours. Its market cap is at $786 billion while its market dominance stands at 50.4%.
The price drop resulted in about $82.93 million in liquidations in the derivatives market as $55.52 million in long positions and $27.42 million in short positions were wiped out.
Experts attribute the drop in Bitcoin’s price to the Grayscale Bitcoin Trust (GBTC) redemptions by bankruptcy estates such as FTX. According to a CoinDesk report, since the GBTC was converted into an ETF earlier this month, $2 billion worth in shares have been dumped by investors. Private data seen by CoinDesk indicates that the FTX bankruptcy estate offloaded 22 million shares worth almost $1 billion.
Author and crypto expert Vijay Boyapati commented on the situation.
1/ The reason for #Bitcoin's recent drop in price, despite the ETF floodgates being opened, is directly related to GBTC redemptions by bankruptcy estates such as FTX.
And the reason GBTC is held by so many companies in bankruptcy is directly tied to the fraud by @BarrySilbert
— Vijay Boyapati 🦢 (@real_vijay) January 23, 2024
While it is expected that the selling pressure will continue to ease as FTX is done selling its shares, large outflows from GBTC could result in further price declines in Bitcoin.
SOL, AVAX, and DOT Lead Altcoin Recovery
Altcoins are also experiencing a resurgence following several nosedives on Tuesday. CMC data shows that his upward trend is being led by Solana, Avalanche, and Polkadot among the larger-cap cryptocurrencies. SOL is up 8.9%, trading at $87 while AVAX is up 11.8% at $31.3. DOT, ICP, and SHIB are up 6.4%, 11.64%, and 3.86% respectively.
Some lower- and mid-cap altcoins have displayed even higher gains. APT is up 10.30% along with TIA (13.76%), STX (14.15%), and INJ (7.31%).
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