Why Bitcoin is falling even as ETFs see billions in new investment

The world’s largest cryptocurrency extended losses into the weekend even as multiple US spot Bitcoin exchange-traded funds posted a strong debut.

Bitcoin is down more than 10% following Thursday’s peak around $48,000.

So what gives?

Off-ramp

Bitcoin plunged 10% from its peak above $48,000 following SEC approval last week as investors used the event to book profits and exit long term bets.

Market observers say participants were likely selling the news, as the euphoria surrounding the approval of Bitcoin exchange traded funds subsides.

“There was always a possibility of ‘sell the news’ pressure from speculators who were front-running approval,” even accounting for some $800 million in new inflows to the Bitcoin ETFs, macro analyst Noelle Acheson, author of the Crypto is Macro Now newsletter and former head of research at Genesis, wrote Friday.

Investors are also likely seeking redemptions from Grayscale’s Bitcoin ETF, analysts said.

Grayscale’s bid to win approval for its own ETF was successful. With about $28 billion in assets under management, the ETF nod has helped creditors of high-profile bankruptcies like FTX.

Now, some investors are demanding their money back.

Since the fund converted to an ETF, investors are able swap their GBTC shares one to one for the value of the Bitcoin they represent, giving them an off-ramp after years without a redemption function.

Many GBTC investors appear desperate to cash in on their shares.

GBTC, whose volume surpassed $2.3 billion on day one trading, has seen a total of $579 million flow out so far, although final data won’t be available until Tuesday due to a lag in settlement.

The market will likely have to absorb some of the GBTC outflows, Bernstein analysts Gautaum Chhugani and Mahika Sapra said in a note on Monday.

“It is fair to assume new ETFs would continue to absorb GBTC redemptions. Thus, it might take longer for new incremental inflows to start impacting fresh demand and the price momentum on underlying Bitcoin,” Chhugani and Sapra said.

Still, an exodus by investors could present new challenges for the 11-year-old firm as it fights to stay competitive in a low-fee environment.

Crypto market movers

• Bitcoin fell 0.3% since Sunday, trading around $42,600.
• Ethereum was flat over the past 24 hours. It traded just above $2,500 by 1 pm London-time.

What we’re reading

• North Korea swiped $293m in crypto last year — and rising crypto prices mean more hacks are coming — DL News
• How VanEck plans to compete with BlackRock for Bitcoin ETF billions — DL News
• Genesis Global Settles With NYDFS, Pays $8M: Exits New York — Milk Road
• Coinbase Partners With Yellow Card To Boost USDC In 20 African Countries — Milk Road
• Only A Handful of Bitcoin Miners Will Be Profitable After Halving: Report — Unchained

Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.