Bitcoin Drops Below $40,000 – Here is Why
Bitcoin has recently experienced a drop below the critical $40,000 mark, signaling a noteworthy downturn in the cryptocurrency's valuation.
As of the latest update, Bitcoin is trading at $38,990, representing an 18% decrease from its peak of $49,000 earlier this month.
This descent to around $40,000, marking Bitcoin’s lowest point since mid-December of the previous year, is a result of sustained selling activities influenced by a combination of broader economic trends and factors specific to the cryptocurrency market.
One significant factor contributing to Bitcoin’s recent challenges is the unexpectedly robust economic data emerging from the United States. This has led to a more cautious outlook regarding potential rate cuts by the Federal Reserve. Consequently, U.S. bond yields and the U.S. Dollar Index (DXY) have strengthened, creating substantial challenges for the broader cryptocurrency landscape.
The U.S. interest rate futures market is currently indicating a nearly 50% probability of a 25-basis point rate cut in March, despite recent data and statements from Federal Reserve policymakers suggesting otherwise. This presents potential macroeconomic hurdles for Bitcoin in the near term.
The approval of several spot Bitcoin exchange-traded funds (ETFs) in the U.S. has also played a pivotal role in the increased market volatility. While these ETFs initially attracted significant capital, they triggered a reaction akin to “selling the news,” contributing to the prevailing bearish sentiment.
READ MORE: Grayscale Dumps $2.14 Billion in Bitcoin Holdings
Notably, Grayscale’s Bitcoin Trust (GBTC) has witnessed considerable outflows, with 52,800 BTC sold since its transition to a spot ETF. This reflects a shift in investor preferences toward new investment products and profit-taking strategies. Reports indicate that FTX has divested $1 billion worth of GBTC shares since its ETF conversion, comprising a substantial portion of the total outflows. The recent sell-off by the now-defunct exchange could alleviate some of the selling pressure observed in recent weeks.
Despite the pronounced downturn, the nine recently launched ETFs have accumulated more Bitcoin than Grayscale has sold over the same period. These “Newborn Nine” have seen their assets under management reach $4.1 billion within just six days of trading, with BlackRock and Fidelity’s ETFs leading the pack.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
