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Why is everyone suddenly bearish about Bitcoin?
By almost any metric, spot Bitcoin ETFs are off to a great start. Yet, the launch of these long-awaited products is causing the price of the sector’s main asset to collapse. Since January 10, the day the U.S. Securities and Exchange Commission (SEC) approved the list of exchange-traded funds, bitcoin (BTC) has fallen about 15%.
What has been widely considered the most bullish event in recent cryptocurrency history, with the potential to attract millions of new bitcoin investors and potentially billions in capital, may actually — at least temporarily — cool bitcoin’s jets.
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This is largely due to billions of dollars coming out of GBTC, which has transitioned from a closed-end trust to an ETF, meaning investors are finally able to withdraw their capital. Grayscale has seen more than $3 billion in redemptions, only some of which flow into other bitcoin ETFs that charge much lower fees than GBTC’s 1.5%.
Only 15% of 2,000 respondents to Deutsche’s survey in the US, UK and EU said they expected the price of bitcoin to stabilize between $40,000 and $75,000 by the end of the year.
Is this negative sentiment towards bitcoin justified? Burniske apparently doesn’t see much positive progress in the near term, without even mentioning the upcoming bitcoin halving (scheduled for April) that many other market watchers hope will support Bitcoin.
“New product innovations are close, but not quite yet… things still feel isolated,” Burniske wrote, adding that “precarious” macroeconomic factors will likely continue to pressure bitcoin.
It’s hard to say exactly what will happen, but it’s also hard to see many long-term headwinds working against Bitcoin. In terms of regulation, it appears the worst is behind the industry now that Binance has resolved the allegations with the Department of Justice and the FTX saga is over.
But to put the recent downward price movements into context, bitcoin fell nearly 30% the day the SEC rejected the first bitcoin ETF application filed by Cameron and Tyler Winklevoss in 2013. Then, there’s the market bullish start that began in 2017, a year that began with The People’s Bank of China decides to ban cryptocurrencies and limit what were then the “big three” exchanges, Huobi, OKCoin and BTCC.
All this to say that bitcoin has always had its ups and downs. Bitcoin ETFs were a disappointment as they immediately fomented another rally, but they are still a symbol of the asset class’s long-term sustainability. The first few weeks of trading have seen record volumes, and as Deutsche’s survey found the majority of ETF flows are from retail investors, indicating that it is an instrument that could see further adoption.
As Burniske said, “As always, patience is your friend.”