The launch of the first exchange-traded funds investing directly in Bitcoin on Jan. 11 led to a spike in value, but the digital asset has now fallen almost 20% as speculators become more cautious about the potential impact of these products. Nine new US spot Bitcoin funds started trading on the same day, resulting in a net $1.2 billion inflow into the group within the first six days. However, $2.8 billion exited the Grayscale Bitcoin Trust, with BlackRock’s iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund attracting most of the influx.
The Grayscale fund experienced significant selling pressure as traders unwound their arbitrage positions, compounded by the bankruptcy estate of crypto exchange FTX offloading assets. The disposals by FTX potentially alleviate the supply overhang, hinting that the intense selling pressure from GBTC may soon subside. The pullback in the price of Bitcoin reflects tougher macro conditions and significant selling pressure, in addition to the impact of the launch of the ETFs.
Bitcoin’s value surged almost 160% last year due to speculation that the ETFs would drive wider adoption of the cryptocurrency by institutional and individual investors, but it has been facing a retreat since the start of 2022. Other tokens such as Ether and BNB remained relatively unchanged in Asia on Tuesday, reflecting the market dynamics set off by the outflows from GBTC that need to be normalized for true price discovery.