Investors unswayed as crypto funds go on the market
Bitcoin’s value has dropped 18% after the approval of exchange-traded funds (ETFs) in the US. After an initial boost, it seems investors proved more cautious than expected.
Initially, when day traders such as BlackRock and Fidelity Investments came out with their ETFs, the market was excited. Bitcoin peaked at $49,021 then dropped to $40,000.
Much was also expected from the Grayscale Bitcoin Trust (GBTC). That $22 billion fund was converted from a closed-end structure to an open ETF. But competing funds turned out to charge lower commission fees, so a $2.8 billion outflow followed.
One of the sellers was the management of bankrupt trading platform FTX. That prompted nervousness, analysts say.
“Bitcoin was challenged by more difficult macroeconomic conditions – demonstrated by rising interest rates and a stronger dollar” explained Sean Farrell of Fundstrat Global Advisors in a note.
There was also “significant selling pressure from traders unwinding their GBTC arbitrage positions, along with asset disposals by FTX bankruptcy management,” the analyst said.
However, the action by FTX’s management may turn out to be positive.
Farrell said the sale by FTX may have eliminated an oversupply. As such, he expects that the “intense selling pressure from GBTC could soon subside”.
Leah Wald, CEO of investor Valkyrie, agreed. “The outflow from GBTC has created a dynamic in the market that needs to be normalised before we discover what the real value is,” she said to Bloomberg.