On Tuesday, Bitcoin fell below $40,000, reaching its lowest level since early December at $39,362 and contributing to a four percent loss from Monday. Overall, Bitcoin has fallen about 19 percent from its post-ETF approval high of $49,048.
Other cryptocurrencies, including Ether (ETH) and Solana (SOL), followed BTC’s downward trend. ETH went below $2,200, while SOL briefly lost the $80 support level. Binance Coin (BNB) also experienced a decline, dropping to $289 and losing the key $300 support level.
The overall value of the entire cryptocurrency market decreased from $1.6 trillion to $1.5 trillion, marking a 5.5 percent drop in just one day. The increase in trading volumes, by 55 percent, is mainly attributed to the market sell-off.
Some analysts suggest that recent selling pressure in the market may be linked to investors exiting the Grayscale Bitcoin Trust (GBTC), which has seen about $2 billion in outflows since January 19. In contrast, both BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund have experienced more than $1 billion in inflows.
“The outflow from GBTC should not matter that much as bitcoin’s inflow into other ETFs have offset the outflow by $1.2 billion so far,” said Bitbank crypto market analyst Yuya Hasegawa.
Bloomberg ETF analyst Eric Balchunas said that GBTC saw outflows of $515 million on Tuesday, resulting in a 13 percent reduction in its outstanding shares.
Veteran trader Bob Loukas suggests that Bitcoin’s weekly cycle chart indicates the price has peaked.
“The damage is done now, weekly cycle topped. Mid February best case for lows IMO if it’s a price rout. March is best cycle timing for low. Good to see some fear build up over time,” said Loukas in a social media post.
When observing Bitcoin’s drop below $40,000, trader Peter Brandt said that the price completed a bearish breakout by confirming a right-angled broadening triangle above $42,400 BTC. According to a chart shared by Brandt on January 22, bears’ price target is around the $34,700 zone.
MicroStrategy, often seen as a proxy for the bitcoin price, declined by four percent. The major mining companies, Marathon Digital and Riot Platforms, both saw a roughly two percent drop. Coinbase also dropped by four percent, partly due to a JPMorgan downgrade expressing concerns about a potential slowdown in the crypto rally.
Bloomberg’s senior commodity strategist, Mike McGlone, anticipates that gold could outperform Bitcoin on a risk-adjusted basis, while Bitcoin may underperform the stock market.
Despite optimistic sentiments regarding the recent approval of spot Bitcoin exchange-traded funds (ETFs) and the upcoming Bitcoin halving, McGlone believed that macroeconomic factors may limit Bitcoin’s ability to achieve new all-time highs in 2024.
McGlone disagrees with the widespread belief that the U.S. Federal Reserve will lower interest rates, which usually helps assets like Bitcoin.
“The Fed will not ease with the ease it has in the past because of inflation it created with easing too much,” said McGlone.
Last week, just three days after its approval, Bitcoin ETFs held almost $30 billion in assets, ranking below gold ETFs with around $95 billion at the top of the U.S. list. In third place, Silver ETFs have $11 billion in assets.
During that period, ETF inflows amounted to nearly $1 billion, equivalent to around 21,000 Bitcoins. BlackRock’s iShares Bitcoin Trust (IBIT) topped the list with 16,362 bitcoins, followed by Fidelity’s Wise Origin Bitcoin Fund (FBTC) with 12,112 Bitcoins.
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