Bitcoin's Retreat Below $40,000 despite the introduction of spot ETFs

Bitcoin (BTC) has recently experienced a notable decline, slipping below the $40,000 mark for the first time since December. Despite the introduction of new spot exchange-traded funds (ETFs) and substantial capital inflows into these funds, selling pressure has persisted, outweighing buying interest.

The launch of several spot bitcoin ETFs on January 11 initially triggered a surge in bitcoin prices, propelling it to $49,000. However, this upward momentum was short-lived, and the cryptocurrency has been on a downward trajectory since, recently breaching the $40,000 threshold. Although bitcoin is currently at its lowest price since the beginning of December, it still stands at more than double its value from the same period last year.

Notably, the newly introduced spot ETFs, including BlackRock's (IBIT) and Fidelity's (FBTC), have attracted significant investments, each accumulating over $1 billion in assets under management (AUM) within the first week of trading. However, this influx of funds needs to be weighed against the substantial outflow from Grayscale's GBTC product, which has seen a multi-billion dollar reduction as investors opt to take profits or migrate to more cost-effective investment vehicles.

The outflow trend extends beyond GBTC, encompassing existing spot bitcoin exchange-traded products in Europe and Canada, as well as futures-based ETFs like ProShares' (BITO). This collective movement has contributed to a bearish turn in the bitcoin market, marking the first such shift since October 2 when the price was $27,530, as reported by 10x Research in a recent Friday report.

According to 10x Research, the central thesis for the first quarter of 2024 anticipated that any rally related to ETFs would be short-lived, with prices expected to decline towards $38,000 by March. This prediction appears to be unfolding, albeit possibly at a faster pace than initially anticipated. The current market conditions may bring some reassurance to bullish investors, reminiscent of the period around October 2 of the previous year, which served as the starting point for a substantial 70% increase in bitcoin prices over the following three months.