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Bitcoin has fallen below $40k despite the SEC’s approval of spot ETFs, with the Grayscale ETF losing more than $2 billion since then.
Bitcoin has unfortunately continued to plunge, dropping below $40,000 for the first time in 2024. The king coin earlier fell to $39,414, and then later rose to $40,052. However, CoinMarketCap data as of this writing shows that the world’s largest cryptocurrency by market cap has again fallen below $40,000, trading at $39,722. Much of Bitcoin’s collapse is reportedly tied to heavy outflows from Grayscale’s spot Bitcoin exchange-traded fund (ETF).
On January 10, the United States Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs after more than a decade of rejections. Although the SEC denied several applications for multiple reasons, including the risk of fraud, the Commission eventually granted permission for trading, much to widespread excitement in the crypto sector. Many predictions concluded that the development would be unmistakably bullish for Bitcoin, with forecasts predicting significant jumps in Bitcoin’s price. However, Bitcoin is not responding as expected and has lost 14% of its value since the approval. In the last 24 hours, Bitcoin has fallen nearly 4%, and over 6% in 7 days.
Bitcoin Drags Major Cryptos
Unfortunately, there seems to be a widespread drop across most major cryptos. For instance, Ether (ETH) has lost 4.35% over the last 24 hours and more than 7% in the past week. Also, both BNB and XRP have lost 3% in 24 hours, while SOL has crashed 6%. Of the 10 largest cryptocurrencies. Avalanche (AVAX) has had the largest fall, losing over 7% in 24 hours and 17% in 7 days. Interestingly, AVAX gained more than 150% in the last three months of 2023.
Some stakeholders believe that the Bitcoin plunge is not surprising. Defiance ETFs CEO and Chief Investment Officer Sylvia Jablonski stated:
“Today’s Bitcoin move is wholly expected. It looks like a ‘sell-the-news’ pullback, before we see the cryptocurrency recapturing its bullish trajectory.”
Jablonski is one of a few who believe there could be more correction. In an interview with CNBC, Katie Stockton from independent research provider Fairlead Strategies said that Bitcoin would plunge to $36,000 before rising again.
FTX Pulled $1Billion Worth of Bitcoin Out of Grayscale’s ETF
Many believe that Grayscale’s outflows are contributing significantly to the plunge in the price of Bitcoin. Since the SEC’s approval, more than $2 billion worth of Grayscale’s ETF shares have left the company’s coffers. While many have suggested the exit is caused by investors looking for cheaper ETFs, a large part of it is FTX’s bankruptcy estate liquidating its shares. According to data reviewed by CoinDesk, the estate sold 22 million shares, worth about $1 billion. Consequently, FTX no longer has any GBTC (Grayscale Bitcoin Trust) ownership. The value of the shares had climbed shortly after the GBTC began trading on NYSE Arca.
Grayscale’s ETF was converted from the GBTC fund, a private product that had nearly $30 billion worth of assets. The fund initially launched in 2013 and only accepted accredited investors. However, it later received permission from the Financial Industry Regulatory Authority (FINRA) in 2015 to trade publicly.
