Bitcoin falls to $40,000, at seven-week low amid Bitcoin ETF launch

Bitcoin, the world's largest cryptocurrency, experienced a significant decline on January 22, dropping to a seven-week low and trading below $40,000 for the first time since the introduction of 11 spot bitcoin exchange-traded funds (ETFs) on January 11, Reuters reported. 

At its lowest since December 4, Bitcoin recorded a 3.98 percent decrease, settling at $39,938.00, following a brief recovery. Ether, the second-largest cryptocurrency, also saw a decline of 6.37 percent, reaching $2,328.30.

Bitcoin had witnessed a surge in value, driven by anticipation of the United States Securities and Exchange Commission (SEC) approving bitcoin ETFs, a move expected to attract a wave of new investors. The cryptocurrency had gained approximately 70 percent since August 2023, when a federal court compelled the SEC to reconsider its rejection of Grayscale Investment's bitcoin ETF application.

Analyst Views

Some analysts foresaw a potential correction in Bitcoin's gains. Others suggested that the cryptocurrency faced challenges in competing with traditional stocks on January 22. The S&P 500 benchmark index achieved fresh record highs, primarily fueled by semiconductors and other tech stocks.

"It feels like bitcoin investors are running up a descending escalator right now as traditional financial benchmarks enjoy the easier ride to record highs," Antoni Trenchev, co-founder of crypto lender Nexo told Reuters, He pointed out that previous major crypto events, such as the initial public offering (IPO) of crypto exchange Coinbase and the launch of bitcoin futures, had been followed by similar bitcoin slumps.

Bitcoin also encountered pressure from outflows in Grayscale Investment's bitcoin trust, converted into an ETF following the SEC's approval of other bitcoin ETF products earlier this month. FTX, which faced bankruptcy in 2022, reportedly sold 22 million shares valued at nearly $1 billion in the ETF, according to a report by CoinDesk.

Trenchev expressed concerns, stating, “Spot bitcoin ETFs are in danger of joining the... crypto hall of infamy.”