Bitcoin, the world’s largest cryptocurrency, has witnessed a significant drop of over one-fifth since reaching its peak earlier this month. The decline occurred after the United States approved its first spot bitcoin exchange-traded fund (ETF), causing investors who had bought the cryptocurrency in expectation of approval to sell after the confirmation. As a result, bitcoin fell to $38,900, down by 20.6% from around $49,000, which was the three-year high it reached on January 11th, as the U.S. Securities and Exchange Commission gave approval to spot bitcoin ETFs.
According to analysts at Deutsche Bank, nearly $4 billion of funds have flowed into the new spot bitcoin ETFs, with BlackRock and Fidelity products being the most popular among investors. However, $2.8 billion of those funds came from Grayscale, which had previously dominated the regulated bitcoin investing market and is now an ETF.
Deutsche Bank further added that the sale of assets from bankrupt crypto exchange FTX was another factor in bitcoin’s price decline. Additionally, shares in Coinbase, the leading U.S. crypto exchange, dipped around 4% in pre-market trading on Tuesday after JPMorgan downgraded the stock to underweight from neutral. The bank said, “the catalyst in bitcoin ETFs that has pushed the ecosystem out of its winter will disappoint market participants,” leading to a decline in the value of other crypto stocks as well.