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March 3, 2024
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Bitcoin

Bitcoin Price Falls as ETF Fever Fades. Brace for a ‘Notorious’ Correction.



Bitcoin

and other cryptocurrencies fell Monday as outflows from the largest spot Bitcoin exchange-traded fund weighed on prices. As the approval of landmark ETFs continues to deliver a “sell the news” dynamic, traders are bracing for a characteristic correction across crypto markets.

The price of Bitcoin has dropped 3% over the past 24 hours to $40,500, a far cry from the largest crypto’s recent peak above $48,000, which marked its highest levels since early 2022. Bitcoin spiked to multi-year highs amid a trading frenzy around the U.S. approval of spot Bitcoin ETFs, a long-awaited catalyst that has proven to be a “buy the rumor, sell the news” trend among investors, despite the long-term bull case.

“Bitcoin is tiptoeing around $40,000 as continued selling from

Grayscale Bitcoin Trust

(GBTC) extinguishes the ETF-approval euphoria and leaves investors with an end-of-party price hangover,” said Antoni Trenchev, co-founder of crypto lender Nexo. “Bitcoin’s short-term destiny rests on the extent and duration of GBTC selling … and whether or not inflows into the other 10 spot-Bitcoin ETFs act as a counterweight.”

Indeed, selling pressure in particular looks to be hitting the Grayscale Bitcoin Trust, which was an existing spot Bitcoin fund that transformed into an ETF when the Securities and Exchange Commission greenlit a wave of such funds on Jan. 10.

“We had 100% market share, and we never expected that we would always have 100% market share,” Michael Sonnenshein, the CEO of digital asset manager Grayscale, told Barron’s in an interview last week.

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“It’s not surprising, with the fund as big as it is—$28 billion—you’re going to see some outflows out of the product,” Sonnenshein said. At the time, Sonnenshein added that there had been a couple hundred million dollars of outflows, but that it had been contrasted directly with inflows to other issuers.

However, as capital flows continue to shake out, it does look like some Bitcoin is leaving the ecosystem, with the market capitalization of the Grayscale Bitcoin Trust falling to $25.6 billion as of Friday and with shares in the fund down a further 2.7% in premarket trading on Monday. This may be further evidence that crypto traders are looking to cash in on gains—and some market participants are bracing for even more violent selling pressures.

“Bitcoin’s ascent could be called long-in-the-tooth because we haven’t seen one of its notorious 30%+ price slumps since the back end of 2022,” said Nexo’s Trenchev. “A drop of such magnitude from the recent peak of $49,000 would take Bitcoin to $34,000.”

Beyond Bitcoin,


Ether

—the second-largest crypto—lost 4% to $2,375. Smaller tokens or altcoins were also in the red, with


Cardano

down 6% and


Polygon

plunging 5%. Memecoins also fell, with


Dogecoin

dropping 5% and


Shiba Inu

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shedding 4%.

Write to Jack Denton at jack.denton@barrons.com



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