Bitcoin is experiencing a big drop! In the early morning of January 23, Bitcoin fell below $40,000 for the first time since December 4 last year, with a daily drop of more than 3%. This is the second big drop in Bitcoin since the US Securities and Exchange Commission approved 11 Bitcoin ETFs on January 10. The first big drop occurred the day after the US Securities and Exchange Commission approved 11 Bitcoin spot ETFs. Bitcoin once fell below $42,000, with a daily drop of more than 7%.
The price trend of Bitcoin did not see a crazy surge as the outside world initially optimistically expected.
So why did Bitcoin fall sharply after the approval of the Bitcoin spot ETF? In summary, there are two major factors. First, the approval of the Bitcoin ETF is a "sell news" event. Second, the problem of US dollar liquidity at the macro level. Arthur Hayes, co-founder of BitMex, said that the downward trend of Bitcoin may tell us that the flow of US dollars will face problems in the future, and this downward trend may continue until the US Treasury releases its quarterly refinancing announcement on January 31.
According to BitcoinNews, Grayscale's GBTC has sold about 60,000 BTC so far. On the contrary, in addition to GBTC, as of January 19, nine other Bitcoin ETF institutions including BlackRock and Fidelity have bought a total of 72,000 BTC. Therefore, the main reason for the sharp drop in Bitcoin is not due to Grayscale's selling.
On-chain analysis firm CryptoQuant believes that the selling mainly came from short-term traders and whales who took profits after last year's rebound, rather than from Grayscale.
Why did Grayscale sell off BTC? Grayscale GBTC was founded in 2013 and has been in existence for 10 years. When the U.S. Securities and Exchange Commission approved its conversion into an ETF, it had accumulated nearly $30 billion in assets. These assets come from large institutions and qualified individual investors. When Grayscale GBTC charges a high fee rate (1.5%) compared to the other 10 Bitcoin ETF institutions, some individual investors will consider redeeming cash and choose other investment institutions with lower fees for investment. The result is that Grayscale can only sell BTC.
Secondly, the existence of large institutions like FTX that directly redeemed and liquidated led to Grayscale selling BTC. According to Coindesk, FTX has sold about $1 billion of Grayscale Bitcoin ETF, which explains most of the outflow of funds.
Since the approval of the Bitcoin ETF, the price of BTC has continued to fall. In theory, now that FTX has completed a large number of holdings, the selling pressure may be relieved, because the liquidation of holdings by bankruptcy estates is a relatively special event.
Coindesk said that since Grayscale GBTC was converted into an exchange-traded fund earlier this month, investors have sold more than $2 billion worth of the fund. A large part of this was the 22 million shares sold by FTX's bankruptcy estate.
JPMorgan analyst Nikolaos Panigirtzoglou said that if the previous $3 billion estimate is correct and $1.5 billion has already exited, then another $1.5 billion may exit the BTC space through profit-taking in GBTC, putting further pressure on prices in the coming weeks.
Of course, there are also optimists in the crypto market who are bullish on Bitcoin in the long term. On January 21, Galaxy Digital CEO said on social media that although some people will sell GBTC, we believe that most of them will be digested by other Bitcoin ETFs. This indigestion will end in the next 6 months, and BTC will usher in higher prices.
According to the latest data released by CC15Capital, in just 6 trading days after the launch of Bitcoin ETF, 9 new spot Bitcoin ETFs have bought about 95,000 BTC worth $3.9 billion. This does not include GBTC. According to Bloomberg ETF analyst James Seyffart on social media, the total trading volume in the first 7 trading days was slightly less than $19 billion.
In addition, the founder of dForce stated on social media that Mt.Gox will unlock 200,000 bitcoins in the next two months to pay creditors, and the Paypal fiat channel has already started paying. In addition, the Bitcoin halving, which is expected to take place in April 2024, will reduce the annual supply by 160,000 bitcoins.
Will Bitcoin face selling pressure again at that time? Let’s wait and see!
