The world’s largest cryptocurrency Bitcoin (BTC) continues to face selling pressure after the Bitcoin ETF approval. In the last few hours, the BTC price tanked by a further 8% slipping all the way to $42,500 levels, as of press time. Some market analysts have also called the Bitcoin ETF launch a failure.
What’s Behind the Bitcoin Price Rout?
The recent dip in Bitcoin prices, is partly due to substantial sales of Grayscale Bitcoin Trust (GBTC) shares, as noted by Anthony Scaramucci, founder of SkyBridge Capital. In an interview with Bloomberg Television, Scaramucci revealed an observed trend of significant Grayscale selling, pointing to holders converting their shares from a trust to an ETF format. The U.S. Securities and Exchange Commission’s recent approval of ETFs prompted many to shift to these lower-fee alternatives, resulting in sell-offs to realize losses.
Grayscale Bitcoin Trust, with its inception in 2013, witnessed a record-breaking first-day turnover of $2.3 billion on Thursday, marking a historic moment for ETFs. Despite being a popular avenue for Bitcoin exposure, the trust’s shareholders, facing losses, opted to move towards cost-effective alternatives. Following Bitcoin’s surge to a two-year high above $49,000 on Thursday, the cryptocurrency faced a decline below $43,000 on Friday.
Grayscale’s managing director of research, Zach Pandl, however, has defended his company’s position. He added that the sale of one Bitcoin product to acquire another should not have an impact on the Bitcoin price.
The shares of GBTC experienced a 5.2% decline, closing at $38.58 on Friday. While GBTC shares had an impressive 300% surge in the previous year, Bitcoin’s increase during the same period was nearly 160%, showcasing the trust’s significant role in Bitcoin investment strategies.
FTX Also Behind the Bitcoin Selling?
Interestingly, Scaramucci also pulls out an FTX angle behind the recent Bitcoin price selling. He added that the bankruptcy estate of FTX added to the cryptocurrency’s downward pressure. FTX, once among the largest crypto exchanges, filed for bankruptcy in 2022 amidst a broader market crash, and the estate is currently liquidating substantial crypto assets.
This sell-off, coupled with the recent approval of Bitcoin exchange-traded funds (ETFs), has contributed to heightened selling activity in the market. Scaramucci anticipates that the supply overhang, driven by FTX’s bankruptcy estate selling, will likely conclude in the next six to eight trading days.
Additionally, he noted a noteworthy development regarding the Wall Street marketing of ETFs. A quiet period, during which Wall Street refrained from marketing these ETFs, is likely to conclude in approximately eight days. This signals a potential shift in dynamics as Wall Street begins actively promoting and marketing Bitcoin ETFs, introducing a new phase to the market landscape.