On a recent Wednesday, the price of Bitcoin, the world’s most significant cryptocurrency by market capitalization, danced around the $40,000 mark, but primarily lingered just below. This price fluctuation coincided with the continued selling off of Grayscale’s spot Bitcoin ETF, a phenomenon closely tracked by industry analysts. As per the data from The Block’s Price Page, Bitcoin was valued at $39,672 at 4:37 p.m. ET. Despite a 1.3% increase in the past 24 hours, the Bitcoin price has seen nearly a 14% drop in the last two weeks.
Understanding the Recent Downtrend
Since the introduction of spot Bitcoin ETFs earlier this month, the price of Bitcoin has been on a downward trajectory. On the day these new products started trading, Bitcoin’s price even crossed the $48,000 mark. Matt Hougan, a Bitwise executive, attributed this trend to an “expectations-led” sell-off. He clarified that this wasn’t strictly an ETF-led sell-off as these ETFs were net buyers of Bitcoin. Instead, it was the market’s expectation of the ETF approval that led to a surge in both spot Bitcoin and Bitcoin derivatives, and the subsequent sell-off.
ETF Trading Volume and Dominant Players
As per The Block’s data, the total trading volume for all spot Bitcoin ETFs has surpassed $20 billion. The market has been dominated by products offered by Grayscale, BlackRock, and Fidelity, accounting for approximately 90% of the total volume. Interestingly, a large chunk of Grayscale’s volume comprised investors selling the fund, which is a conversion of the firm’s flagship GBTC fund.
Hougan suggested that the market had anticipated larger net flows into ETFs than what has been observed. The market is now “unwinding that bet,” according to him. In his view, the market might have overestimated the short-term impact of ETFs.
Grayscale’s Trading Volume Takes a Dip
On the same Wednesday, Eric Balchunas, Bloomberg Intelligence’s senior ETF analyst, shared data indicating that Grayscale’s trading volume was set to close the day at its lowest level since the new products began trading. By the time of his post, Grayscale had recorded about $463 million in trading volume, a significant drop from previous days. On the first day of spot Bitcoin ETFs trading, Grayscale had registered $2.3 billion in trading volume. Balchunas interpreted the decline in GBTC volume as a possible sign of selling exhaustion.
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