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The recent plunge in Bitcoin’s price blindsided the market as the SEC approval of several Bitcoin ETFs was supposed to trigger robust adoption and skyrocketing prices for the leading cryptocurrency. Unfortunately, Bitcoin has tumbled over 20% from its 2024 high of $49,000 to less than $39,000 at the current trade. The market is abuzz with myriad speculations, questions looming around this sudden fall and its potential ramifications on the bull market in the crypto sphere.
One key element contributing to the declining Bitcoin value is an unusual trend where miners are loading their Bitcoin holdings onto exchanges, surpassing the pace witnessed during the FTX collapse in November 2022. The Bitcoin reserve held by miners has seen a significant drop, indicating a shift in strategy where these coins are being sold instead of accumulated for long-term investment potential. The increase in selling pressure has offset the buying demand, even with the diligent purchase of Bitcoin by major ETF providers backing up their newly proposed funds.
Substantial outflows from Grayscale Bitcoin Trust, one of the world’s most significant Bitcoin holders, played a part in the sharp downswing of Bitcoin’s price. The impact of this outflow, involving billions in BTC to Coinbase, cannot be overstated. Grayscale’s decision to transfer its holdings was motivated by the relatively high expense fees of 1.5% compared to U.S. spot ETF alternatives. FTX’s decision to redeem nearly $1 billion in GBTC compounded this situation. Every time GBTC shareholders cash their shares, a corresponding sale of BTC is made.
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