(Bloomberg) - Bitcoin has fallen over 20% since the Jan. 11 launch of the first exchange-traded funds investing directly in the token as speculators become more cautious about the potential impact of the products.
The digital asset spiked to $49,021 on the day the ETFs from issuers including BlackRock Inc. and Fidelity Investments went live. Bitcoin traded at $38,975 as of 8:38 a.m. Tuesday in New York, a 20.5% drop from that intraday peak.
“As bearish sentiment appears to be prevailing, the next crucial price levels for bitcoin that could provide support are estimated to be between $38,000 and $36,000,” analysts at crypto exchange Bitfinex wrote in a Tuesday note.
The 10 Bitcoin ETFs have recorded $1.1bn in total net flows so far this month, according to data on the Bloomberg Terminal as of Monday. That includes the impact of Grayscale’s Bitcoin Trust, which has seen nearly $3.5 billion in outflows so far as investors offload long-held stakes, according to the data.
“Over the past two weeks, Bitcoin has been challenged by tougher macro conditions — evidenced by rallying rates and a strengthening dollar — and significant selling pressure from traders unwinding their GBTC arbitrage positions along with the FTX bankruptcy estate offloading assets,” Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC, wrote in a note.
The disposals by FTX potentially remove a supply overhang, suggesting that the “intense selling pressure from GBTC may soon subside,” Farrell added.
Bitcoin surged almost 160% last year, outperforming traditional assets such as stocks, amid speculation that the ETFs would catalyze wider adoption of the cryptocurrency by institutional and individual investors. The token has been retreating since the turn of the year and trailing global markets.
Tokens such as Ether and BNB also fell sharply along with Bitcoin, the largest digital asset, which is roughly $30,000 below its 2021 pandemic-era record of almost $69,000.
“GBTC outflows have created a dynamic in the market that needs to be normalized before we will see true price discovery,” said Leah Wald, chief executive officer of digital-asset investment firm Valkyrie Investments.
(Updates with ETF figures)
By Olga Kharif
With assistance from Sidhartha Shukla and Emily Nicolle
