Bitcoin has fell by more than 20% from a three-year high, which was reached shortly after the U.S. Securities and Exchange Commission (SEC) approved the first bitcoin exchange-traded funds (ETFs) in January. Analysts cite a combination of profit-taking after the highly anticipated event and broader market uncertainty as reasons for the correction.
Bitcoin is retreating after the ETF approval wave
The price surge in anticipation of the ETF’s approval saw Bitcoin reach nearly $49,000 on January 11. However, since the green light for the ETFs, the cryptocurrency has steadily retreated. trading around $39,500 at the moment of writing.
According to some analysts, they have seen a classic “sell the news” scenario unfold. Investors had largely priced in the price ETF Approved for months, and once it actually happened, some took the opportunity to lock in the profits, she added.
While nearly $4 billion has flowed into the new spot ETFs, a significant portion, analysts note, has come from existing funds like Grayscale that have transitioned to an ETF, suggesting that on balance less new investment has been made than what the numbers might imply. Furthermore, the ongoing liquidation of assets from the bankrupt crypto exchange FTX has increased downward pressure on prices.
Bitcoin slightly above the $40K level today. Chart: TradingView.com
Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank, said:
“It appears that the apparently large amount of daily outflows from GBTC are affecting the market in a psychological way.”
The downturn extends beyond Bitcoin major cryptocurrencies are also experiencing losses. Ether, the world’s second-largest cryptocurrency, is down nearly 4%, while Solana and other altcoins have seen similar declines. The price drops have also affected crypto-related stocks, with Coinbase shares down around 4% in pre-market trading.
Top 10 cryptos drenched in red today. Source: Coingecko
Despite the recent price correction, analysts remain divided on the short-term prospects for Bitcoin. Some believe the pullback is nearing an end, with support levels around $36,000 likely to hold. Others believe further downturn is possible before a sustained recovery occurs.
BTC price action in the last week. Source: Coingecko
Bitcoin: Volatility Persists, Long-Term Outlook Strong
Bitcoin has undergone significant corrections following major news events in the past. However, long-term fundamentals remain strong, and many believe Bitcoin is still on track for a new all-time high in 2024.
Recent market volatility highlights the risks associated with investing in Bitcoin and other cryptocurrencies. While the potential for high returns exists, investors should be aware of the significant price fluctuations and uncertain regulatory landscape before entering the market.
As the post-ETF aftermath unfolds, the cryptocurrency market finds itself submerged in a sea of red. The volatility underlines the sensitivity of digital assets to market sentiment and regulatory developments.
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