Bitcoin Slips Back Toward $40,000 as ETF Hype Simmers

Emily Nicolle and Elijah Nicholson-Messmer, Bloomberg News

(Bloomberg) -- Bitcoin fell below $40,000 for the first time since early December as enthusiasm over the launch of exchange traded funds that directly invest in the largest cryptocurrency ebbs.

The digital currency token fell as much as 5.3% to $39556 as of 2:42 pm in New York on Monday. That’s the lowest since Dec. 4. Smaller tokens like Ether and Solana were down 6.7% and 9.3% respectively.

Digital tokens have mostly been on a downward trajectory so far this year after an intense bull-run which saw Bitcoin rising by nearly 160% in 2023, outpacing gold and stocks. Much of that rally was attributed to anticipation of the Securities and Exchange Commission approving launch of spot Bitcoin ETFs in the US. It did so on Jan. 10, allowing almost a dozen issuers to offer spot BTC ETFs. Markets started giving up some of the gains after the SEC’s decision as a sell-the-news trade.

Read more: What Are These New Bitcoin ETFs and How Do They Work?: QuickTake

The declines were in stark contrast to positive performance elsewhere, with global equities advancing on Monday. Europe’s STOXX index rose 0.7% while Nasdaq 100 up 0.2%, as investors remained optimistic about the US economy’s resilience ahead of fourth-quarter GDP data on Thursday.

“We are seeing weakness across all digital assets, as new ETF inflows have so far failed to offset profit-taking by speculative traders on positions put on prior to the announcement,” said Caroline Mauron, chef executive of digital-asset derivatives liquidity provider Orbit Markets. “While $40,000 might be an important psychological level, we don’t expect a break through to trigger a cascade of liquidation here, and see the next support level around $38,000.”

The first week of trading for spot Bitcoin ETFs in the US saw about $6.5 billion in shares change hands, according to a Bloomberg Intelligence note on Friday, much higher than recorded in ETFs pegged to traditional assets.

“Market sentiment has slowed down after the ETF listings for certain, and the use of leverage continues to trend lower indicating cautious positions being opened by traders,” Fadi Aboualfa, head of research at Copper Technologies Ltd., said in an email. “Things are shaping up to be very interesting.”

--With assistance from Suvashree Ghosh.