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Bitcoin Price Declines 20.6% After ETF Approval

Bitcoin's price decline, currently standing at $38,900, can be attributed to multiple factors.

Wed, 24 Jan 2024, 09:06 am UTC

The world's largest cryptocurrency, Bitcoin, experienced a significant decline, currently standing at $38,900, which represents a 20.6% decrease from its three-year high of around $49,000 on January 11. This drop in value occurred following the U.S. Securities and Exchange Commission's recent approval of spot Bitcoin ETFs.

Impressive Inflows into New Spot Bitcoin ETFs

Analysts at Deutsche Bank report that nearly $4 billion of funds have flowed into the newly introduced spot Bitcoin ETFs, with a focus on products offered by prominent institutions such as BlackRock and Fidelity. Reuters noted that $2.8 billion of these inflows originated from withdrawals out of Grayscale, which formerly held a dominant position in the regulated Bitcoin investing market and is now transitioning into an ETF structure.

According to Deutsche Bank, the decline in Bitcoin's price can also be attributed to the sale of assets from FTX, a bankrupt cryptocurrency exchange. This additional factor exerted further downward pressure on the cryptocurrency's value, according to US News.

Downgrade of Coinbase Stock and Market Expectations

Shares of Coinbase, the leading U.S. crypto exchange, experienced a 4% dip in pre-market trading on Tuesday. This decline in stock value followed JPMorgan's decision to downgrade Coinbase from neutral to underweight. JPMorgan expressed the belief that Bitcoin ETFs, considered a catalyst for the crypto ecosystem's resurgence, would ultimately disappoint market participants.

Coinbase's downgrade is not an isolated incident, as other cryptocurrency stocks are also facing pressure in the market. The overall sentiment surrounding the cryptocurrency sector remains uncertain.

The growing popularity of spot Bitcoin ETFs led to significant inflows into these investment vehicles, particularly with offerings from BlackRock and Fidelity. Furthermore, the sale of assets from FTX, combined with the downgrade of Coinbase stock by JPMorgan, further impacted Bitcoin's value.

The entire cryptocurrency market is feeling the effects of these developments, emphasizing the need for vigilance and careful monitoring as the industry continues to evolve.

Photo: Bastian Riccardi/Unsplash

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