Recent data reveals that the new spot ETF issuers have accumulated more than 68,000 Bitcoin in their first week of operation.
The crypto market has been hit with a sudden downturn as the price of Bitcoin (BTC) experienced a 4.5% drop on January 18, reaching its lowest level in a month at $40,800.
This decline follows the recent approval of spot Bitcoin ETF products by the United States Securities and Exchange Commission (SEC).
Spot Bitcoin ETF Approval and Market Reaction
The approval of the spot Bitcoin ETF was seen as a remarkable milestone for the crypto industry, providing investors with a new way to gain exposure to Bitcoin without directly holding the digital asset. Despite this positive development, Bitcoin’s price has not only failed to sustain its previous highs but has also witnessed a notable decrease, dropping to levels not seen in a month.
CoinMarketCap, which tracks the world’s largest and most liquid cryptocurrencies, mirrored this decline, registering a 3.9% drop over the past 24 hours. This unexpected downturn has left investors and market analysts grappling with the factors contributing to Bitcoin’s decline and its potential ramifications for the broader cryptocurrency market.
Bartosz Lipiński, CEO at Cube.Exchange, a trading platform said in a comment that as “the ETF hype has faded a bit, it would make sense for traders’ attention to be focused elsewhere. Current options positioning suggests support around $40,000, which is a major psychological price point.”
A unique aspect influencing Bitcoin’s recent price movements is the situation surrounding Grayscale’s Bitcoin Trust (GBTC). Created in 2013, GBTC held over $28 billion in Assets Under Management (AUM) before converting to an ETF. Since trading as an ETF commenced, GBTC has experienced approximately $1.6 billion in outflows.
Recent data reveals that the new spot ETF issuers have accumulated more than 68,000 Bitcoin in their first week of operation. On the flip side, Grayscale’s GBTC has shed roughly 40,000 Bitcoin, resulting in a net addition of about 28,000 Bitcoin to Bitcoin ETFs.
Michael Safai, founding partner at quantitative trading firm Dexterity Capital, highlighted the “GBTC situation,” noting that “many investors wanted to wait for the Grayscale discount to collapse prior to exiting their positions. Now that the discount is virtually gone, some newly liberated traders may have sold and are waiting to get back into ETFs soon.”
Global Impact and Outflows of BTC ETF on Bitcoin Price
Meanwhile, K33 Research Analyst Vetle Lunde emphasized that even before US regulatory approval, various spot Bitcoin products were already trading globally. Lunde noted that global Exchange-Traded Products (ETPs) currently hold more than 864,000 Bitcoin, providing some perspective on the relatively minor addition of U.S. vehicles so far.
Bitcoin ETPs globally currently hold 864,719 BTC.
That's equal to 4.4% of BTC's circulating supply and roughly 45% of the size of crypto exchange reserves.
ETFs are a huge part of Bitcoin's market structure, impacting both spot markets and the CME – and its relevancy is due to… pic.twitter.com/OtLSQN6aN6
— Vetle Lunde (@VetleLunde) January 17, 2024
Lunde also pointed out that, in addition to GBTC exits, Canadian and European ETPs have had big outflows in the last week, with investors perhaps collecting profits or reallocating funds to more cost-effective US ETFs.
The recent Bitcoin price decline has also affected publicly traded companies linked to the digital asset market. Coinbase Global Inc (NASDAQ: COIN), the largest US crypto exchange, saw a 6.7% decrease and is down 17% since the ETF approvals. Bitcoin miner Marathon Digital and Bitcoin proxy MicroStrategy Inc (NASDAQ: MSTR) also experienced declines of 6.9% and 3% respectively.