Bitcoin plunges to lowest value since mid-December amid dwindling ETF hype

Bitcoin, the world’s largest digital asset, plunged to its lowest value since mid-December as the speculative demand driven by hype over new Exchange-Traded Funds (ETFs) has waned.

This has left the cryptocurrency in negative territory since the beginning of 2024. The asset briefly hovered around US$40,000 before settling at US$40,843 as of 11.40am on Friday in Singapore, marking a 4% drop in the last 24 hours. Other smaller cryptocurrencies such as Ether, Solana, and Polkadot have also faced struggles.

In the previous year, Bitcoin had experienced a 157% surge due to optimism surrounding the inaugural launch of the first US ETFs that directly held the token on January 11. The digital assets market also benefited from predictions of a more relaxed monetary policy. Currently, traders are recalibrating their expectations for interest rate cuts while analysing the amount of capital the ETFs garner.

Greg Moritz, co-founder at crypto hedge fund AltTab Capital, commented on the situation. This type of correction after a significant run-up is normal for Bitcoin, he said.

Nine new spot Bitcoin ETFs, including offerings from BlackRock Inc. and Fidelity Investments, were introduced last week. The Grayscale Bitcoin Trust, valued at US$25 billion, transitioned from a closed-ended structure to an ETF.

BlackRock’s iShares Bitcoin Trust has seen over US$1 billion in investor inflows, while the Fidelity Wise Origin Bitcoin Fund has received around US$880 million. The Grayscale Bitcoin fund, established in 2013, has had approximately US$1.6 billion in outflows since its ETF trading inception.

Last year, when it was a closed-ended vehicle, the Grayscale fund traded at a discount to its underlying holdings, prompting some to gamble on the gap shrinking. Speculators may now be exiting this trade as the discount has almost disappeared.

GBTC selling, that’s the story, stated crypto investor Meltem Demirors. She also highlighted that shares in the fund have been pledged as collateral or used to repay bad loans as part of crypto sector insolvencies, reported Bangkok Post.