Bitcoin’s Price Plummets After ETF Approval

Bitcoin dropped below the $40,000 mark on Monday for the first time since December as excitement appears to be fading after the Security and Exchange Commission’s (SEC) recent approval of bitcoin ETFs. The world’s most popular crypto has lost 15% of its value over the last two weeks, with markets now left wondering whether the downward momentum will continue, or if a reversal is in sight.  

In this article, we’ll brief you on everything you need to know about the current situation and where bitcoin’s price could potentially be heading next. 

The SEC’s approval of bitcoin ETFs 

On 10 January the SEC approved a range of bitcoin ETFs, marking a massive milestone in the crypto industry that could help spark mass adoption of bitcoin and other altcoins in mainstream finance. The crypto industry has been pushing for the launch of bitcoin ETFs for years in an attempt to open the sector to more investors and boost the asset’s price in the long term.  

For a while, the SEC had been rejecting applications from fund firms looking to launch spot bitcoin ETFs. However, Grayscale Investments LLC managed to successfully overturn the SEC's decision, leading to them and another 10 fund firms being able to issue spot bitcoin ETFs. 

Early adoption among investors 

Unfortunately, funds haven't been pouring into these newly approved ETFs. Net inflows were just under $900 million in the first three days of trading, which is underwhelming considering that bitcoin has a market cap of around $783 trillion.  

One explanation behind the price slide is that people have been withdrawing money from the largest ETF provided by Grayscale because of their 1.5% annual fee. With many investors switching to newer ETFs offering zero fees for the first six months, followed by a fee of 0.21% after the end of that 6-month period. However, the money exiting Grayscale’s ETF is not all returning to the new ETFs. 

Even though adoption of these ETFs hasn’t been as strong as hoped, it is important to keep in mind that crypto is still a relatively new asset class, and it may take years for institutional investors and big financial firms to begin embracing new products like bitcoin ETFs. 

The market’s reaction 

After the SEC’s statement of approval, markets reacted favourably, with bitcoin’s price surging to an impressive $49,000. However, its price plummeted shortly after this and since 12 January, it’s been trading in a range between $40-$43k. 

Where’s bitcoin heading next? 

BTCUSD has been trying to trade higher since December 2023, but instead of doing so, the price was stuck in a consolidation phase. In recent days, the price has breached the lower end of this range and placed anyone who bought in recent weeks at a loss. Given that people who buy will try to close their positions at higher prices to reduce their losses, it is likely that the price will remain soft. The downtrend will remain in play if the price trades below the 42K mark.  

The multi-month general trend remains bullish, and with the bitcoin halving event in April, the general outlook is positive for now – with famed crypto analysts still looking to buy on the dips.  

The most important level everyone is watching is the 32K mark, but there are also other levels like 33.4K and 35.6K that traders should watch closely.