Bitcoin’s Post-ETF Meltdown
Dip buyers be damned. The total crypto market cap (TOTAL) has sunk like a stone, erasing a quarter billion dollars in wealth amidst the 14% plunge that has followed the arrival of spot BTC ETFs. Can crypto markets rebound?
Traditional markets may be up on the day, with both the broad basket S&P 500 and the tech-heavy Nasdaq 100 indices both setting new cycle highs, but crypto prices continue to trade down.
Bitcoin has experienced outsized losses compared to TOTAL off its ETF debut, down 17% from then and a further 0.9% on the day, with the outsized negative price action partially a direct result of continued Grayscale redemptions combined with crypto traders unwinding their bullish BTC ETF approval bets.
Grayscale has just sent out another 12.87K BTC from their wallets, worth $531M.
— Arkham (@ArkhamIntel) January 19, 2024
In total so far, Grayscale has deposited 47.9K BTC to Coinbase Prime - worth $1.97B at current prices.
These likely represent redemptions of GBTC shares.https://t.co/K7P3NmGZFH pic.twitter.com/U9EggPJt3m
Inflows to newly established spot ETF products have no doubt been significant, but it is questionable how much demand is coming from net new capital aping BTC versus from market participants rotating from BTC proxies (i.e.; crypto equities like COIN, MSTR, and MARA) into actual spot exposure.
Broader crypto equities have fallen into a hash downtrend since December, erasing billions of dollars more in capital off their peaks than spot BTC ETFs have accumulated; $13.4B in market cap has evaporated from Coinbase alone!
Crypto market participants may have gotten overzealous in anticipation of the inflows that spot BTC ETFs could bring, but a supportive market for risk assets, like equities, provides a favorable environment for crypto to be in. It remains to be seen if the risk bid will last…