In a notable downturn, Bitcoin plunged to a seven-week low on Monday, slipping below the $40,000 mark for the first time since the introduction of 11 spot bitcoin exchange-traded funds (ETFs) on January 11.
The world’s largest cryptocurrency experienced a 3.98% decline, settling at $39,938.00—its lowest point since December 4, following a brief recovery. Ether, the second-largest cryptocurrency, also witnessed a dip of 6.37%, reaching $2,328.30.
Bitcoin had seen a surge in value amid growing anticipation of the U.S. Securities and Exchange Commission (SEC) approving bitcoin ETFs, a move expected to bring in a wave of new investors. The cryptocurrency had gained approximately 70% from August, spurred by a federal court compelling the SEC to reevaluate its rejection of Grayscale Investment’s bitcoin ETF application.
While some analysts had predicted a correction in Bitcoin’s value after its substantial gains, others pointed to its struggle against traditional stocks. This challenge became evident as the S&P 500 benchmark index achieved fresh record highs on Monday, driven by strong performances in semiconductor and other tech stocks.
Antoni Trenchev, co-founder of crypto lender Nexo, remarked, “It feels like bitcoin investors are running up a descending escalator right now as traditional financial benchmarks enjoy the easier ride to record highs.” Trenchev drew parallels with previous major crypto events, such as the initial public offering of crypto exchange Coinbase (NASDAQ: COIN) and the launch of bitcoin futures, both of which were followed by similar bitcoin slumps.
Additionally, Trenchev highlighted the pressure on bitcoin due to outflows from Grayscale Investment’s bitcoin trust. The trust had been converted into an ETF following the SEC’s approval of other bitcoin ETF products earlier in the month. CoinDesk reported on Monday that FTX, which faced bankruptcy in 2022, sold 22 million shares worth nearly $1 billion in the ETF.
“Spot bitcoin ETFs are in danger of joining the… crypto hall of infamy,” Trenchev warned.
This recent downturn raises questions about the short-term trajectory of Bitcoin and its resilience against external market forces, particularly in the face of regulatory developments and competition from traditional financial instruments.
