Bitcoin fell sharply to an over seven-week low while also breaking below key levels on Tuesday as an initial boost from the approval of several spot exchange-traded funds now appears to be waning.
Bitcoin fell 4.3% to $39,867.0 by 19:54 ET (00:54 GMT).
The world’s largest cryptocurrency saw a strong melt-up over the past year amid speculation that the Securities and Exchange Commission (SEC) would approve ETFs that directly track the price of the token-a first for U.S. markets. The token peaked at a near two-year high earlier this month, just as the SEC approved spot ETFs.
But bitcoin’s performance since the approval has been largely underwhelming, defying forecasts that the price would shoot up with the entrance of more institutional capital.
All the spot ETFs which were approved and listed earlier this month- including BlackRock’s (NYSE:BLK) iShares Bitcoin Trust (NASDAQ:IBIT), ARK 21Shares Bitcoin (NYSE:ARKB) and WisdomTree Bitcoin (NYSE:BTCW), were trading down between 13% and 14% since their debut. The ETFs had marked a strong first day of trading, but have fallen almost consistently so far in their price performance and trading volumes.
Bitcoin was pressured by resilience in the dollar, amid growing expectations that the Federal Reserve will keep interest rates higher for longer. Traders were seen sharply cutting bets this week that the Fed will begin trimming rates as soon as March 2024.
Bets on a March rate cut have also driven gains in bitcoin over the past two months. But the token, which offers no yield, usually sees subdued performance in a high-rate environment.
While the SEC’s approval of the spot ETFs offered some regulatory credibility to the industry, SEC Chairman Gary Gensler maintained his stance that crypto assets were “exceptionally risky” investments.
The crypto industry is still struggling with a massive loss of faith, following several high-profile bankruptcies and regulatory crackdowns over the past two years. The SEC has ongoing cases against major exchanges Coinbase (NASDAQ:COIN) and Binance, the latter of which was also slapped with billions of dollars in fines in late-2023 over criminal charges raised by the DOJ.
Bitcoin’s recent downturn largely contrasted with a sharp rally in traditional financial markets, particularly U.S. equities. The S&P 500 and the Dow Jones closed at record highs on Monday, buoyed chiefly by a melt-up in technology stocks ahead of several major earnings due this week.
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