Bitcoin Sees a 20% Decline Since the Launch of Trading Funds

Bitcoin has declined by approximately 20% since the launch of the first traded funds on the stock exchange on January 11th, which directly invest in the cryptocurrency. Traders have become more cautious about the potential impact of these products.

The digital currency rose to $49,021 on the day when exchange-traded funds were launched by issuers including BlackRock and Fidelity Investments. Bitcoin was trading at $39,718 as of 8:33 am on Tuesday in Singapore, a decrease of 19% from the peak during the day.

Nine new American instant Bitcoin funds started trading on January 11. Meanwhile, the Grayscale Bitcoin Trust (GBTC) with a value of $22 billion was converted from a closed-end structure to an exchange-traded fund. In the first six days, a net flow of $1.2 billion went into the group, as mentioned by Eric Balchunas, the senior ETF analyst at Bloomberg Intelligence, on the X website, as reported by “Al Arabiya Business.”

According to Chonas, the iShares Bitcoin Trust owned by BlackRock and the Fidelity Wise Origin Bitcoin Fund received the majority of the inflows, while $2.8 billion was withdrawn from the Gray Scale Fund. Among the sellers was the bankrupt cryptocurrency exchange FTX, which disposed of most of its shares in the Grayscale Fund.

Sean Farrell, the Head of Strategy at “Fundstrat Global Advisors” wrote: “Over the past two weeks, Bitcoin has faced a challenge due to stricter overall conditions – evident from the rise in interest rates and the strengthening of the dollar – and significant selling pressure from traders who have been unwinding their positions in GBTC alongside unloading real estate assets to cover FTX’s bankruptcy.”

Farrell added that the disposals carried out by FTX may potentially lead to the removal of the supply surplus, indicating that “the intense selling pressure from GBTC. may soon ease.”

The cryptocurrency Bitcoin increased by approximately 160% last year, outperforming traditional assets such as stocks, amid speculations that exchange-traded funds would encourage wider adoption of the cryptocurrency by institutional and individual investors.

However, the symbol has been declining since the beginning of the year and falling behind the global markets.

Symbols like “Ether” and “BNB” faced difficulty in Asia on Tuesday along with “Bitcoin,” the largest digital asset, which is down about $30,000 from the record high recorded during the pandemic era in 2021, which was around $69,000.