Bitcoin, the world’s largest cryptocurrency, plunged to a seven-week low, dipping below the $40,000 mark for the first time since the launch of 11 spot bitcoin exchange-traded funds (ETFs) on January 11. At 8:35 AM GMT, the currency is currently trading for $39631.80. This setback comes after a recent surge fueled by growing excitement over the anticipated approval of bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC).
Recent rally
The increased anticipation surrounding the SEC’s potential approval of Bitcoin ETFs triggered a remarkable increase in the currency’s value. The market was anticipating bitcoin ETF to be a getaway for a multitude of new investors. Since August, the currency experienced a substantial 70 percent increase due to a federal court decision that compelled the SEC to review its rejection of Grayscale Investment’s Bitcoin ETF application.
Market correction
Market analysts had long anticipated a correction in Bitcoin’s gains. On Monday, as the currency started decreasing, some observers highlighted the cryptocurrency’s challenges in competing with traditional stocks. Hence, the S&P 500 benchmark index achieved fresh record highs due to gains in semiconductors and other tech stocks.
Meanwhile, other analysts drew attention to the current situation, comparing Bitcoin investors to individuals navigating a descending escalator. This comes in light of traditional financial benchmarks effortlessly reaching new record highs. They drew parallels with historical events, citing the initial public offering of crypto exchange Coinbase and the introduction of bitcoin futures. Both events triggered a similar downturn in Bitcoin’s value.
Additional pressure and outflows
Analysts also pointed out the additional pressure on the currency. They highlighted outflows from Grayscale Investment’s Bitcoin trust. The trust was converted into an ETF following the SEC’s approval of other bitcoin ETF products earlier in the month.
Moreover, CoinDesk reported a significant development on Monday regarding FTX, a cryptocurrency exchange and crypto hedge fund, which faced bankruptcy in 2022. The fund sold 22 million shares, amounting to nearly $1 billion, in the ETF.
Read: Gold prices hold steady, still above $2,000 threshold
Concerns for spot Bitcoin ETFs
In light of these developments, analysts expressed concerns that spot bitcoin ETFs might face challenges. It might potentially join the ranks of infamous crypto downturns. The market now awaits further developments, as the currency navigates a complex landscape amid regulatory shifts and increased competition with traditional financial instruments.
As the cryptocurrency market continues to evolve, investors and analysts alike are closely monitoring the dynamics, acknowledging the unpredictable nature of the digital asset landscape. The recent dip in the currency’s value serves as a reminder of the inherent volatility and the intricate interplay between regulatory decisions, market sentiments, and external factors shaping the future of cryptocurrencies.
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