Bitcoin’s ETF hangover

Bitcoin posted its worst streak in about a month amid ebbing fanfare over new US exchange-traded funds for the largest digital asset.

The token fell as much as 1.9% before paring some of the slide to trade at US$42 239 as of 9am on Monday in Singapore. It has dropped for four straight days, the worst such run since mid-December. Smaller crypto coins struggled for much traction, with ether, BNB and solana posting mixed performance.

The batch of almost a dozen ETFs, including from investment titans BlackRock and Fidelity Investments, began trading on 11 January. Bitcoin briefly hit a two-hear high above $49 000 after they went live but then began retreating.

The spike and quick turn lower have the hallmarks of a “buy-the-rumour, sell-the-fact reaction” some market watchers had expected, Tony Sycamore, a market analyst at IG Australia, wrote in a note. He sees a possible slide to $38 000 to $40 000 based on the signals from chart patterns for bitcoin.

Supporters of bitcoin’s contentious role as a store of value contend that the first US spot ETFs for the token herald increased investor access to the cryptocurrency. Sceptics point to 2022’s deep crypto crash and ensuing bankruptcies as reasons for caution about wider adoption despite a partial market rebound last year.

Bloomberg Intelligence’s senior ETF analyst Eric Balchunas said the new US spot funds achieved a net inflow of $819-million over the first two days of trading. That included $500-million for BlackRock’s iShares Bitcoin Trust and $422-million for the Fidelity Wise Origin Bitcoin Fund.


The $26-billion Grayscale Bitcoin Trust — the largest such fund — saw $579-million of outflows after converting into an ETF last week, Balchunas said. The fund previously had a closed-ended structure and traded at a discount to its underlying holdings last year, spurring some to bet on the gap narrowing.

Speculators taking profits on that trade now that the discount has all but gone may be part of the reason for bitcoin’s recent weakness, wrote Noelle Acheson, author of the Crypto Is Macro Now newsletter.

Read: Big winner from bitcoin ETF approval is … ethereum

“It’s very unlikely that all the outflows from the Grayscale Bitcoin Trust went back into bitcoin,” she said. “The new funds are likely to continue to see strong inflows over the next week, as money on the sidelines is funnelled in, and as the marketing machines get going. This could be offset short-term from more outflows as speculative positions are unwound.”  — Suvashree Ghosh, (c) 2024 Bloomberg LP

AI summary of this article

  • Bitcoin falls for four days after US spot ETFs launch.
  • ETFs attract inflows but Grayscale Bitcoin Trust sees outflows.
  • Market watchers see possible slide to $38 000-$40 000 range.
  • Bitcoin supporters see ETFs as boost for adoption.

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