In a significant market development, the price of Bitcoin (BTC) has recently plummeted below the $40,000 mark, marking its first dip since early December. This downturn follows a noteworthy pullback from its post-spot Bitcoin ETF approval highs, which soared above $49,000. The cryptocurrency, having shed over 3.5% in a single day, is currently hovering just above the $40,000 threshold. The root cause of this sharp correction is believed to be FTX's sale of up to $1 billion in Grayscale Bitcoin Trust (GBTC) holdings, a move initiated in response to the approval of spot Bitcoin ETFs earlier this month.
Reports surfaced on Monday revealing FTX's significant liquidation of assets amidst ongoing bankruptcy proceedings. The sale of GBTC holdings, totaling $1 billion, has contributed substantially to the outflows witnessed in the newly converted ETF. GBTC itself has experienced a staggering $2 billion in outflows since its transformation into a spot ETF. This stands in stark contrast to the positive net inflows of over $4 billion into newly launched spot Bitcoin ETFs by major players like BlackRock and competitors.
While the net flows into the broader ETF market have been encouraging, the unexpected surge in Grayscale outflows has rattled market sentiments. With FTX's sales assumed to have concluded, there is cautious optimism among Bitcoin enthusiasts that the selling pressure on the cryptocurrency might ease. However, the market seems to be at odds with this sentiment, as bearish forces strive to push the Bitcoin price below the crucial $40,000 threshold.
The recent approval of spot Bitcoin ETFs in the US marked a historic moment for the cryptocurrency. While it promised direct exposure to Bitcoin price movements for US investors, the aftermath has been a mix of positive net inflows and a noticeable deflation in the market. The spot Bitcoin ETF approvals, perceived as a significant catalyst, triggered a "sell-the-news" event, causing a substantial price reversal.
Technical analysis suggests that the decline in Bitcoin's price might not be over. Breaking below key support levels, the cryptocurrency is now eyeing a near-term test of November highs in the $38,000 range. Further declines could open the door to a drop back to the long-term support-turned-resistance zone between $32,000 and $33,000.
Despite the current market turbulence, the bullish case for Bitcoin in 2024 remains robust. The introduction of new spot Bitcoin ETFs brings a structural source of long-term demand, complemented by the upcoming halving that will reduce sell pressure from Bitcoin miners. Additionally, potential Federal Reserve interest rate cuts in 2024 suggest improving liquidity conditions, creating a favorable environment for increased demand and reduced supply. In the face of short-term uncertainties, long-term Bitcoin enthusiasts see an opportunity to acquire tokens at attractive prices as BTC approaches the $30,000s.
