Crypto Quill

Bitcoin, the world’s largest cryptocurrency by market capitalization, has fallen to its lowest level in a month after the initial excitement over the approval of several spot bitcoin exchange-traded funds (ETFs) in the U.S. last week.

Bitcoin ETFs Fail to Boost Demand

The launch of the first spot bitcoin ETFs in the U.S. was widely anticipated as a major catalyst for the crypto market, as it would provide easier access and exposure to bitcoin for retail and institutional investors. However, the market reaction has been muted, as the ETFs have failed to attract significant inflows or trading volumes.

According to data from ETF.com, the four spot bitcoin ETFs that started trading last week have collectively gathered only $1.6 billion in assets under management (AUM) as of Jan. 19, 2024. In comparison, the first gold ETF in the U.S., SPDR Gold Trust (GLD), amassed $1.3 billion in AUM on its first day of trading in 2004.

The trading volumes of the bitcoin ETFs have also been disappointing, as they have averaged less than $200 million per day, far below the expectations of some analysts who predicted billions of dollars in daily turnover. The low volumes suggest that there is not much pent-up demand for bitcoin ETFs, or that investors are waiting for more options and lower fees before jumping in.

Bitcoin Price Slumps Below $40,000

The lackluster performance of the bitcoin ETFs has coincided with a sharp decline in the price of bitcoin, which has dropped below $40,000 for the first time since Dec. 20, 2023. Bitcoin is down more than 20% from its all-time high of $52,853 reached on Jan. 9, 2024, shortly after the U.S. Securities and Exchange Commission (SEC) approved the first batch of spot bitcoin ETFs.

Some analysts have attributed the price slump to profit-taking, technical factors, and regulatory uncertainty. Bitcoin had rallied more than 50% in the fourth quarter of 2023, as investors anticipated the approval of spot bitcoin ETFs. However, the event was already priced in, and some traders may have sold the news to lock in gains.

Additionally, bitcoin’s technical indicators have turned bearish, as the cryptocurrency has broken below several key support levels and moving averages. Bitcoin’s relative strength index (RSI), a momentum indicator, has also diverged from the price, signaling a correction.

Moreover, the regulatory environment for crypto remains unclear and challenging, as the SEC and other authorities have expressed concerns and issued warnings about the risks and challenges of the nascent industry. The SEC has also delayed or rejected several applications for bitcoin futures ETFs, which are seen as more favorable by some investors due to their lower fees and tracking errors.

Bitcoin Bulls Remain Optimistic

Despite the recent downturn, some bitcoin bulls remain optimistic about the long-term prospects of the cryptocurrency and the ETFs. They argue that the ETFs are still a positive development for the crypto space, as they provide legitimacy, transparency, and liquidity to the market. They also expect more institutional adoption and innovation to drive the growth and adoption of bitcoin and other cryptocurrencies.

For instance, Larry Fink, the CEO of BlackRock, the world’s largest asset manager and the sponsor of one of the spot bitcoin ETFs, said that he is a “big believer” in bitcoin and that it is “bigger than any government”. He also said that BlackRock is working on creating more crypto products and services for its clients.

Similarly, Michael Sonnenshein, the CEO of Grayscale, the largest digital asset manager and the sponsor of the Grayscale Bitcoin Trust (GBTC), said that the approval of spot bitcoin ETFs is a “decade in the making” and a “watershed moment” for the crypto industry. He also said that Grayscale is committed to converting GBTC into an ETF when possible, and that it is exploring other ways to enhance its products and offerings.