Bitcoin (^BTCUSD) tumbled to a 7-week low today and has slumped more than -20% since spiking to a 2-year high on January 11 when the SEC finally approved spot Bitcoin ETFs. However, the cryptocurrency market has reacted in a buy-the-rumor-sell-the-fact mode since then as the big surge into cryptocurrencies failed to materialize following the SEC approval, and speculators have become more cautious about the potential impact of the products.
Bloomberg Intelligence said a net $1.1 billion flowed into the newly approved Bitcoin ETF funds since trading began in the ETFs on January 11. That includes the impact Grayscale’s Bitcoin Trust (GBTC), which has seen nearly $3.5 billion of outflows as investors offloaded long-held stakes. Nine new U.S. spot Bitcoin funds started trading on January 11, while the $22 billion Grayscale Bitcoin Trust (GBTC) converted from a closed-ended structure into an ETF.
Bitcoin surged almost 160% last year, outperforming traditional assets such as stocks and bonds, amid speculation that approval of spot Bitcoin ETFs would lead to wider adoption of cryptocurrencies by institutional and individual investors. However, Fundstrat Global Advisors LLC said, “Over the past two weeks, Bitcoin has been challenged by tougher macro conditions and significant selling pressure from traders unwinding their GBTC arbitrage positions along with the FTX bankruptcy estate offloading assets.”
According to data from CoinShares, global demand for cryptocurrency investment products has eased as cryptocurrency funds saw an outflow of $21 million last week. Future Fund Advisors LLC said Bitcoin could be in for a 70% plunge this year as expected institutional interest fails to materialize. Also, famed investors such as Warren Buffet and financial veterans such as JPMorgan Chase CEO Dimon warn against Bitcoin’s lack of intrinsic value.
Many analysts had expected fund flows out of GBTC to be allocated into cheaper spot Bitcoin ETFs as GBTC charges higher fees of 1.5% per annum compared to 0.2%-0.4% fees for the other Bitcoin ETFs. GBTC previously served as a Bitcoin warehouse as it collected the apex crypto from investors and instead offered them over-the-counter (OTC) traded shares in the trust. Following spot Bitcoin ETF approvals, redemptions from GBTC totaled $1.6 billion in the first four days. Investors speculated that the price of Bitcoin would increase as the $1.6 billion in redemptions from GBTC would be put into other spot Bitcoin ETFs. However, the Financial Times reported that the net effect was net neutral as only fund reallocation occurred.
More Crypto News from Barchart
- SEC Finally Approves Bitcoin-Spot ETFs
- 3 Blockchain Stocks to Bet on New Highs for Bitcoin
- Can Bitcoin Maintain its Bullish Momentum?
- Where Will Coinbase Stock Be In 1 Year?
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
/Intel%20Corp_%20Santa%20Clara%20campus-by%20jejim%20via%20Shutterstock.jpg)
/EV%20in%20showroom%20by%20Robert%20Way%20via%20Shutterstock.jpg)
/AI%20(artificial%20intelligence)/Businessman%20touching%20the%20brain%20working%20of%20Artificial%20Intelligence%20(AI)%20Automation%20by%20Suttiphong%20Chandaeng%20via%20Shutterstock.jpg)
