Bitcoin experienced a significant decline, dropping to a low not seen in over seven weeks, coupled with breaking through key support levels on Tuesday. The dip occurred as the initial excitement surrounding the approval of several spot exchange-traded funds (ETFs) appeared to lose momentum.
As of 19:54 ET (00:54 GMT), Bitcoin witnessed a 4.3% decline, settling at $39,867.0. The world's largest cryptocurrency had previously demonstrated a robust uptrend over the past year, driven by speculation that the U.S. Securities and Exchange Commission (SEC) would greenlight ETFs directly tracking the token's price – a historic development for U.S. markets. Bitcoin reached a near two-year high earlier this month, coinciding with the SEC's approval of spot ETFs.
Contrary to expectations, Bitcoin's performance post-approval has been lackluster, defying predictions of a surge in price with increased institutional capital. Spot ETFs, including BlackRock's iShares Bitcoin Trust, ARK 21Shares Bitcoin, and WisdomTree Bitcoin, all approved and listed this month, have experienced declines ranging from 13% to 14% since their debut. Despite a strong initial day of trading, these ETFs have consistently fallen in both price performance and trading volumes.
Bitcoin faced pressure from the resilience of the U.S. dollar, driven by mounting expectations that the Federal Reserve would maintain higher interest rates for an extended period. Traders have adjusted their expectations, reducing bets that the Fed would commence rate cuts as early as March 2024.
Earlier optimism for a March rate cut had contributed to Bitcoin's gains over the preceding two months. However, the cryptocurrency, known for lacking yield, typically exhibits subdued performance in a high-interest-rate environment.
While the SEC's approval of spot ETFs provided regulatory credibility to the cryptocurrency industry, SEC Chairman Gary Gensler maintained a cautious stance, labeling crypto assets as "exceptionally risky" investments. The crypto industry continues to grapple with a loss of confidence following high-profile bankruptcies and regulatory crackdowns over the past two years. Ongoing SEC cases against major exchanges Coinbase and Binance, the latter facing substantial fines in late 2023 over DOJ-raised criminal charges, contribute to the sector's challenges.
Bitcoin's recent downturn contrasts sharply with the notable rally in traditional financial markets, particularly U.S. equities. The S&P 500 and the Dow Jones achieved record highs on Monday, primarily driven by a surge in technology stocks ahead of major earnings announcements scheduled for the week.
