Bitcoin ($BTC) has experienced a significant drop with the leading cryptocurrency falling below the $40,000 mark for the first time this year. This decline comes after the launch of multiple spot Bitcoin exchange-traded funds (ETFs) in the U.S., a move that initially sparked a buying frenzy among investors.
Prior to the approval of these ETFs by the U.S. Securities and Exchange Commission, investors had shown increased interest in Bitcoin, driving up its price. However, the weeks following the approval have seen a significant reversal.
Sylvia Jablonski, CEO and Chief Investment Officer at Defiance ETFs, commented on the situation, telling CNBC, “Today’s bitcoin move is wholly expected. It looks like a ‘sell-the-news’ pullback, before we see the cryptocurrency recapturing its bullish trajectory.”
Bitcoin price movement
The anticipation surrounding the ETF approvals pushed Bitcoin’s value to over $47,000 on January 9, marking a two-year high. However, this peak was not sustained, and the price has since fallen.
Currently, Bitcoin has decreased by 10% over the past month, with a 4% drop in the last 24 hours. The price now stands at $39,129, marking the first time it has fallen below $40,000 since its rally in December last year.
The Bitcoin fear and greed index, as of January 23, indicates a neutral sentiment, a shift from the previous greed status.
BTC ETF outflows
The recent downturn in Bitcoin’s value is partly attributed to significant outflows from Bitcoin ETFs. Notably, the Grayscale Bitcoin Trust (GBTC) experienced a record outflow of $640 million in a single day, the largest in its history. The total withdrawals have now reached approximately $3.45 billion.
James Seyffart, an NFT analyst, highlighted this trend in a recent social media post, noting the rapid pace of these outflows.
He posted on social media app X: “Outflows aren’t slowing — they’re picking up. This is the largest outflow yet for GBTC. Total out so far is $3.45 Billion.
It was recently reported that a large portion of these outflows was from the FTX bankruptcy estate, who dumped 22 million of the GBTC shares.
Overbought crypto market
Prior to this downturn, the cryptocurrency market had been on an upward trajectory for an extended period, with little to no major corrections. This bullish trend was largely driven by the anticipation of the approval of a spot BTC ETF.
From mid-October, when the price was around $26,000, to its January peak of $48,500, Bitcoin experienced an approximately 86% increase, with almost no significant pullbacks.
Upcoming Bitcoin halving
Despite the current downward trend, there is still optimism from some investors. The upcoming Bitcoin halving event in April is a key focus for many. This event, which halves the Bitcoin block reward, reducing the rate at which new Bitcoins are created, has historically led to increases in Bitcoin’s price.
While it is difficult to predict the market’s direction, the halving event is seen by some as a potential turning point that could lead to a resurgence in Bitcoin’s value.