Bitcoin slid to the lowest since mid-December as the speculative demand for the token sparked by hype about new exchange-traded funds dissipates, leaving the cryptocurrency in the red since the start of 2024.
The largest digital asset flirted with a drop below $40,000 before trading at $40,843 as of 11:40 a.m. Friday in Singapore, a decline of 4% in the past 24 hours. Smaller tokens like Ether, Solana and Polkadot also struggled.
Bitcoin surged 157% last year on optimism about the eventual Jan. 11 launch of the first US exchange-traded funds to directly hold the token. Digital assets also got a tailwind from bets on looser monetary policy. Traders are now assessing how much money the ETFs attract and paring expectations for interest-rate cuts.
“This type of correction after a significant run-up is normal for Bitcoin,” said Greg Moritz, co-founder at crypto hedge fund AltTab Capital.
Nine new spot Bitcoin ETFs went live last week, including from BlackRock Inc. and Fidelity Investments. The $25 billion Grayscale Bitcoin Trust converted from a closed-ended structure into an ETF.
BlackRock’s iShares Bitcoin Trust has passed $1 billion in investor inflows. The equivalent figure for the Fidelity Wise Origin Bitcoin Fund is about $880 million. Grayscale’s Bitcoin fund, which was created in 2013, has seen about $1.6 billion in outflows since it started trading as an ETF.
The Grayscale fund traded at a discount to its underlying holdings last year when it was a closed-ended vehicle, spurring some to bet on the gap narrowing. Speculators may be exiting that trade now that the discount has all but gone.
“GBTC selling, that’s the story,” said crypto investor Meltem Demirors. Shares in the fund have also been “pledged as collateral or used to repay bad loans” as part of crypto sector insolvencies, she said.