The cryptocurrency market witnessed a significant shake-up this week as Bitcoin, the world's premier digital asset, experienced a sharp decline, dropping to the $38,000 level. This downward trend coincides with a massive sell-off by Grayscale Investments, amounting to nearly $600 million worth of Bitcoin.
The tumult in the crypto market was marked by Bitcoin's fall to $38,505, a new low that followed the U.S. Securities and Exchange Commission's (SEC) approval of 11 spot Bitcoin exchange-traded funds (ETFs) in the United States. This decline slashed Bitcoin's market capitalization by about $40 billion, bringing it to a total of $767 billion.
Analysts point to two major factors influencing this downturn: the institutional sell-off of the newly approved Bitcoin ETFs and the overall low demand for crypto assets. The significant outflow of funds from Grayscale Investment's Bitcoin ETF GBTC to Coinbase, involving approximately 15,200 BTC valued at around $590 million, is a critical component of this market shift.
Gabor Gurbacs, an advisor for Tether and VanEck, criticized the timing of the Bitcoin ETF approvals, suggesting that earlier approvals could have mitigated the current market pressure. "If Bitcoin ETFs were approved earlier (fairly!) then there wouldn't have been this much selling/crossflow from one fund: GBTC," Gurbacs stated, adding, "GBTC is an aberration that hurt many investors and traders over time. The truth is regulators enabled it by restricting competition for no good reason."
Matteo Greco, a research analyst at Fineqia International, sheds light on the structural issues within Grayscale's GBTC, noting, "GBTC customers were restricted from redeeming shares and could only sell them on the secondary market due to the product's structure, before the conversion." This restriction, combined with Grayscale's relatively high management fee of 1.5% (compared to competitors' 0.2%/0.3%), has led to significant investor withdrawals.
Despite these challenges, Bitcoin showed signs of resilience. As of 2:22 a.m. Eastern Time on Wednesday, the cryptocurrency was trading at $40,006.63, marking a slight upward trajectory. With a 24-hour trading volume of $31,033,322,928, Bitcoin saw a 0.46% increase in value over the day, signaling a modest recovery. However, it's worth noting that Bitcoin has experienced a 6.55% decrease in value over the past week.
The current circulating supply of Bitcoin stands at 19,606,856 BTC, emphasizing its pivotal role in the cryptocurrency market. Furthermore, its market capitalization has climbed to an impressive $784,325,640,094, according to CoinMarketCap data.
