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Despite ETF Approval, Bitcoin Price Crashes Below $40,000

By Oluchukwu Ikemefuna

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In a dramatic turn of events, the bitcoin price has plunged below $40,000, leaving investors shocked. The recent debut of a much-anticipated Bitcoin exchange-traded fund (ETF) has fueled optimism for a cryptocurrency price rally. 

However, instead of celebrating, investors are worried as the price of Bitcoin drops even after receiving regulatory approval. In this post, we’ll be reviewing the factors that triggered Bitcoin’s downturn despite the regulatory green light and exploring the potential for recovery.

What Is The Cause Of The Bitcoin Crash?

The green light given to Bitcoin Spot ETFs by the Securities and Exchange Commission (SEC) has stirred up turbulence in the world of cryptocurrency prices, causing a split in sentiment among traders regarding BTC.

Though experts are still untangling the reasons behind the downturn, various factors seem to be in play. Some attribute it to early investors seizing the opportunity to cash in after the recent surge, while others point to broader market concerns fueled by geopolitical tensions and rising inflation. Speculation even suggests that institutional investors who hopped on the ETF bandwagon might be withdrawing their funds faster than expected.

As of the latest update, the most valuable cryptocurrency is trading at approximately $38,940, marking its lowest point this month and a $10,000 dip from its January peak. Over the past week, it has experienced a three-day consecutive drop, the longest losing streak since mid-December.

Regardless of the main cause, the crash has left a less-than-pleasant impression on many Bitcoin enthusiasts. While some maintain optimism, interpreting the dip as a temporary correction, others worry that this could signal a more prolonged bearish trend for the cryptocurrency.

What Is The Effect Of This Crash?

Bitcoin’s value plummeted to below $40,000 per coin, triggering a ripple effect on other prominent cryptocurrencies like Ethereum, XRP, and Solana. The collective market downturn, a fallout from the recent approval of multiple-spot Bitcoin ETFs, has resulted in a staggering $300 billion in losses within just two weeks.

Analysts from Bitfinex suggest that key support levels for Bitcoin hover around the $38,000 mark, aligning closely with the short-term holder’s realized price of $38,307 and the $36,000 threshold.

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Factors Affecting Bitcoin Price

On the debut of spot BTC ETFs on US exchanges, Bitcoin made a swift climb beyond $49,000, marking its first venture into this territory since 2022. However, this surge was fleeting, and the cryptocurrency soon retraced, finding stability around and below the $43,000 support level.

In the subsequent week, Bitcoin found itself engaged in sideways trading, signaling a departure from its previous bullish momentum. Reports suggest that the challenging macroeconomic landscape, marked by escalating interest rates and a strengthening dollar, has played a role in Bitcoin’s recent challenges.

Data reveals that investors have shed more than $2 billion from Grayscale Bitcoin Trust (GBTC) since its conversion into an ETF around January 10. Furthermore, the approval of the Bitcoin ETF has unfolded as a sell-the-news event, with a surplus of sellers compared to buyers in the market.

However, signs point to potential market stability as more investors join the market. Traditional financial institutions linked to Bitcoin ETFs have also slashed fees significantly. This move is in response to the influx of new exchange-traded funds available to US investors, according to reports.

Analysts foresee the market bottoming out, expressing optimism for a rebound as anticipation builds for the April Bitcoin halving.

FAQS

Why did the Bitcoin price crash below $40,000 despite the ETF approval?

The approval of a Bitcoin ETF doesn’t guarantee immediate price stability. Market dynamics, macroeconomic factors, and investor sentiment can influence short-term price movements, leading to unexpected declines.

How does the approval of a Bitcoin ETF impact its price?

While ETF approval is generally positive for long-term adoption, short-term market reactions are unpredictable. Traders may take advantage of the news to engage in profit-taking or react to broader economic conditions

Are there any specific reasons for the recent Bitcoin price crash after the ETF approval?

Market participants may have sold off Bitcoin for various reasons, including profit booking, concerns over global economic uncertainties, or technical factors triggering a sell-off, causing the price to dip below $40,000.

Should investors be concerned about the recent price drop?

Market volatility is inherent in cryptocurrencies. Investors should consider their risk tolerance and long-term goals. Short-term fluctuations, even after positive developments like ETF approvals, are not uncommon in the crypto space.

Conclusion

The recent approval of ETFs did not serve as the anticipated catalyst to propel Bitcoin’s price beyond the $40,000 mark, as market dynamics proved to be more complex than a singular event’s influence. The cryptocurrency market remains inherently volatile, subject to various factors ranging from regulatory developments to macroeconomic trends. While the approval of ETFs is undoubtedly a significant step towards mainstream acceptance, investors should be mindful of the inherent unpredictability of the crypto space. The recent price downturn underscores the importance of a comprehensive understanding of market dynamics and the recognition that short-term fluctuations do not necessarily undermine the long-term potential of cryptocurrencies.

References

  • .forbes.com-Bitcoin ETF Panic: ‘Critical’ Price Level Revealed After $300 Billion Ethereum, Solana And XRP Crash
  • technext24.com-Bitcoin price crashes below $40,000 despite ETF approval hype.

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Blessing Ukibe
Blessing Ukibe

Medical Student at Nnamdi Azikiwe University|Tech content expert at Silicon Africa Technology|Lover of fun books and fun fun ☺️

Articles: 90

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