Why Bitcoin Price Lost Ground After ETFs

Certain (self-proclaimed) experts didn’t hold back on the Bitcoin ETF: “That’s why Bitcoin will skyrocket to a million dollars within days to weeks,” wrote Samson Mow on X (formerly Twitter) – and his optimism was far from that. Only. Across the crypto ditch, the usual suspects were now predicting the eventual demise of the mother of all cryptocurrencies with the same enthusiasm. Nothing like that happened.

Bitcoin has lost a few percent since the introduction of ETFs and is now at +- $42,500, the same level as at the beginning of this year. The most watched Bitcoin ETF, BlackRock’s, has lost 16.5 percent since its peak ($29.60) a few minutes after trading began, and is now at $24.72. Why the burglary?

There are many indications that the slump has to do with ETF fees.

Here’s what you need to know: Grayscale Investments was also one of the candidates for a Bitcoin ETF. Grayscale managed the first US Bitcoin fund, the Grayscale Bitcoin Trust (GBTC). Anyone who wanted to invest in Bitcoin in the US without owning Bitcoin themselves could benefit from this fund. Grayscale did not do this completely selflessly, but instead charged high costs: 2 percent. Nevertheless, the vehicle was a great success. At times the fund owned more than 3 percent of all Bitcoins with a value of more than 20 billion.

At the same time, the money manager tried to convert the fund into an ETF (exchange traded fund). The two investment vehicles differ in terms of tradability, fees and accessibility, but the U.S. Securities and Exchange Commission (SEC) nonetheless thwarted the plan. After winning a lawsuit last year, Grayscale’s application was accepted along with the others in January and the fund became an ETF. The high costs remain. Although Grayscale has reduced these from 2 to 1.5 percent, they are still well above the competition. Why? It is suspected that parent company Digital Currency Group, which has been struggling since the collapse of the FTX, does not want to simply risk these revenues.

And so it happened as it had to happen: on the first day, the new Grayscale ETF experienced an outflow of more than half a billion euros. As the Financial Times reports, this trend was confirmed. In the first three days, $1.1 billion of assets were withdrawn.

As a result, Grayscale has to sell Bitcoins. Suspected Grayscale accounts have moved more than 11,000 Bitcoins (equivalent to 473 million) in recent days. Some of this may have been absorbed by the new Bitcoin ETFs. However, the additional supply caused the price to drop. At more than $49,000, this was slightly higher than all of last year. Many speculators will therefore probably have realized the profits of the past days, weeks and months.

Furthermore, numerous speculators viewed the ETF approvals as a so-called sell-the-news event and were only looking for short-term profits. Therefore, it would be wrong to draw a conclusion about ETFs now. Only the coming years will bring certainty.