Bitcoin’s Monthly Winning Streak Ends as ETF Excitement Fades

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Bitcoin posted its worst streak in about a month after the US Securities and Exchange Commission approved spot Bitcoin (BTC) ETFs.

The leading cryptocurrency remained highly volatile in the past few days, ultimately trading little changed at $42,655 as of now.

The recent decline marked the longest losing streak for Bitcoin since mid-December, leaving investors puzzled about the cryptocurrency’s short-term direction.

The catalyst for this recent bout of turbulence was the introduction of nearly a dozen US exchange-traded funds (ETFs) focused on cryptocurrencies, including offerings from investment giants BlackRock Inc. and Fidelity Investments.

These ETFs officially started trading on January 11th, and Bitcoin initially surged to a two-year high above $49,000 in response.

However, the enthusiasm quickly faded, and the cryptocurrency retraced its steps.

Buy the Rumor, Sell the Fact

Market analysts have attributed the Bitcoin price action to a classic “buy-the-rumor, sell-the-fact reaction.”

Tony Sycamore, a market analyst at IG Australia Pty, noted that chart patterns suggest a possible slide to the $38,000 to $40,000 range for Bitcoin.

This pattern suggests that the excitement over the ETFs had been largely priced into the market, leading to profit-taking by some investors.

Supporters of Bitcoin argue that these US spot ETFs represent a significant milestone for the cryptocurrency, providing increased access for institutional and retail investors.

On the other hand, skeptics point to the tumultuous year that cryptocurrencies, particularly Bitcoin, experienced in 2022, marked by a deep crash and subsequent bankruptcies.

Despite a partial market rebound last year, concerns about wider adoption linger.

New Spot Funds Receive Substantial Inflows

Eric Balchunas, Bloomberg Intelligence’s senior ETF analyst, reported that the new US spot funds received a net inflow of $819 million over the first two days of trading.

This included substantial investments in BlackRock’s iShares Bitcoin Trust and the Fidelity Wise Origin Bitcoin Fund.

However, the $26 billion Grayscale Bitcoin Trust, the largest Bitcoin fund, saw $579 million in outflows after converting into an ETF the previous week.

The shift in investor sentiment was partly due to the fund’s transition from a closed-ended structure to an ETF, narrowing the discount to its underlying holdings.

Noelle Acheson, author of the Crypto Is Macro Now newsletter, suggested that the recent weakness in Bitcoin may be attributed to speculators taking profits as the discount between the Grayscale Bitcoin Trust and its holdings nearly vanished.

While it is unlikely that all the outflows from the Grayscale Bitcoin Trust were reinvested directly into Bitcoin, the new ETFs are expected to continue seeing strong inflows as more money on the sidelines enters the market.

In the coming weeks, these ETFs are likely to attract even more attention and inflows as their marketing campaigns gain momentum.

However, the market should remain cautious, as short-term outflows may occur as speculative positions are unwound.

As reported, according to Andrew Peel, the head of digital asset markets at investment banking giant Morgan Stanley, the approval of spot Bitcoin ETFs could signify a “potential paradigm shift in the global perception and use of digital assets.”

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