Bitcoin, the world’s largest cryptocurrency, has experienced a significant downturn, dropping by over 20% from its recent peak earlier this month. The decline follows the approval of the first spot bitcoin exchange-traded fund (ETF) by the United States, triggering a sell-off among investors who had initially entered the market in anticipation of the regulatory nod.
At present, Bitcoin is priced at $38,900, marking a substantial decrease from its three-year high of around $49,000, which it reached on January 11, immediately following the US Securities and Exchange Commission’s (SEC) decision to greenlight spot bitcoin ETFs.
Analysts at Deutsche Bank report that nearly $4 billion has been invested in the newly introduced spot bitcoin ETFs, with a significant portion directed towards products offered by BlackRock and Fidelity. However, a noteworthy $2.8 billion of these funds were redirected from Grayscale, a former fund that has transitioned into an ETF, previously holding a dominant position in the regulated bitcoin investment market.
Deutsche Bank also points out that the liquidation of assets from the bankrupt crypto exchange FTX contributed to the downward pressure on Bitcoin’s price.
In a parallel development, Coinbase, the leading US-based cryptocurrency exchange, experienced a 4% drop in pre-market trading on Tuesday. JPMorgan’s decision to downgrade Coinbase shares from neutral to underweight cited the disappointment in the catalyst provided by bitcoin ETFs, which was expected to invigorate the crypto ecosystem after a period of dormancy.
