Bitcoin experienced a substantial decline to an over seven-week low, coupled with a breach below key levels on Tuesday, signaling a waning enthusiasm following the initial boost from the approval of several spot exchange-traded funds (ETFs).
As of 19:54 ET (00:54 GMT), Bitcoin fell 4.3% to $39,867.0, marking a sharp pullback from its recent peak.
The world’s largest cryptocurrency witnessed a robust surge over the past year, fueled by speculation that the Securities and Exchange Commission (SEC) would greenlight ETFs directly tracking its price—a groundbreaking move for U.S. markets. The token reached a near two-year high earlier this month, coinciding with the SEC‘s approval of the spot ETFs.
However, Bitcoin’s performance post-approval has been lackluster, defying expectations of a significant uptick with the inflow of more institutional capital.
Spot ETFs, including BlackRock’s iShares Bitcoin Trust, ARK 21Shares Bitcoin, and WisdomTree Bitcoin, which were approved and listed earlier this month, have seen a decline of 13% to 14% since their debut. Despite a strong first day of trading, these ETFs have consistently fallen in both price performance and trading volumes.
Bitcoin faced downward pressure amid the dollar’s resilience, fueled by growing expectations that the Federal Reserve will maintain higher interest rates for an extended period. Traders have adjusted their expectations, reducing bets this week on an early rate cut by the Fed, impacting Bitcoin, which traditionally sees subdued performance in a high-interest-rate environment due to its lack of yield.
While the SEC’s approval of spot ETFs provided regulatory credibility to the industry, SEC Chairman Gary Gensler maintained a cautious stance, emphasizing that crypto assets remain “exceptionally risky” investments.
The cryptocurrency industry is grappling with a loss of faith following high-profile bankruptcies and regulatory crackdowns over the past two years. Ongoing cases against major exchanges Coinbase and Binance, coupled with substantial fines imposed on Binance in late 2023 over DOJ charges, have contributed to the sector’s challenges.
Bitcoin’s recent downturn contrasts sharply with a robust rally in traditional financial markets, particularly U.S. equities. The S&P 500 and the Dow Jones closed at record highs on Monday, driven primarily by a surge in technology stocks ahead of major earnings releases this week.
