Can Crypto Recover? Why Bitcoin, Dogecoin, Ethereum's Sudden Slump Matters
By April Fowell
- Dogecoin, Ethereum, and Bitcoin fell by 2.9%, 6.4%, and 5.9%, respectively, following SEC approval of spot Bitcoin ETFs.
- Bitcoin's price dropped nearly 20% from its $49,000 peak post-ETF approval, signaling waning enthusiasm.
- Bitcoin ETF launch raised expectations, but reports indicate investors cashing in on profits, with significant outflows from Grayscale's ETF.
Tuesday saw a decline in a number of significant cryptocurrencies as investors considered the potential effects of money inflows into the market following the U.S. the first spot Bitcoin (CRYPTO: BTC) exchange-traded funds (ETFs) were approved by the Securities and Exchange Commission (SEC) over two weeks ago on January 10, 2024.
After everything was said and done during the normal trading session today, the price of Dogecoin, Ethereum, and Bitcoin had dropped 2.9%, 6.4%, and 5.9%, respectively.
The price of Bitcoin has dropped by almost 20% from its peak of over $49,000 following the acceptance of the ETF, as the enthusiasm surrounding the approvals appears to be fading. On January 11, the day after news of the SEC's official approval of eleven rival spot Bitcoin ETFs broke, that represented a three-year high.
In all fairness, Bitcoin has increased by more than 70% in the last 12 months. A multi-month rise that started in October 2023, after the SEC's decision not to appeal a federal court order in August that barred cryptocurrency asset management Grayscale Investments from turning its well-liked Grayscale Bitcoin Trust into an exchange-traded fund (ETF), was responsible for the majority of that gain.
This was viewed by many investors as a major development for the bitcoin industry as a whole. After all, compared to creating individual cryptocurrency accounts or wallets with a broker that specializes in cryptocurrencies, ETFs are a far more accessible medium for investors wishing to invest in digital assets. Like readily purchasing and selling publicly traded equities, ETF shares may be purchased and sold by ordinary investors through almost any broker throughout the regular trading day.
Bitcoin ETF Launches: Market Potential and Initial Inflows
Observers of the cryptocurrency market speculated that if the first Bitcoin ETFs were authorized, it would not only validate cryptocurrencies as a viable investment vehicle for the general public but also potentially bring ETF providers a huge profit as investors' money poured into cryptocurrencies. The capital inflow from spot Bitcoin ETFs has the potential, over time, to raise the total market value of cryptocurrencies by over $1 trillion, according to research by data analytics firm CryptoQuant.
Some investors are definitely taking their rapid cryptocurrency profits off the table in light of the recent huge surge.
For instance, a report released this morning by digital asset management CoinShares claims that in the first week following the introduction of the first Bitcoin ETFs, inflows into cryptocurrency funds were "only" $1.25 billion. However, last week's inflow of $21 million reversed as several sizable institutional investors used the rise to reduce their own holdings.
Even yet, such startling news calls for further context. This week on X, Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, said that withdrawals of over $2.2 billion from Grayscale's spot bitcoin ETF alone had been the main driver of the outflows. The estate of the defunct cryptocurrency exchange FTX, which sold off almost $1 billion in assets as part of its bankruptcy procedures, was one of those significant sellers.