Title: "Bitcoin Drops to $43,000, Spot Bitcoin ETFs and Blockchain Concept Stocks Decline"

Written by: He Hao, Wall Street Watch

On the second day of the spot Bitcoin ETF listing, digital currencies faced another wave of selling. Bitcoin briefly fell below $42,000 per coin, and as of now, the intraday decline exceeds 7%, reported at $42,562.1 per coin.

Spot Bitcoin ETFs generally fell around 6%. Among them, DEFI dropped over 6.6%, FBTC fell 6.4%, HODL and BRRR decreased by 6%, BTCO declined by 5.9%, and BITO fell by 5.9%.

Blockchain concept stocks generally plummeted. Among them, Ebang International ADR fell 13.6%, Hut 8 dropped 10.7%, The9 ADR declined 10.2%, MicroStrategy fell 8.5%, Canaan Creative ADR dropped 8.3%, Riot Platforms fell 7.4%, cryptocurrency exchange Coinbase dropped 6.2%, and popular brokerage Robinhood fell 5.3%.

According to the Securities Times, CoinGlass data shows that as of the morning of January 13, Beijing time, over 100,000 investors in the cryptocurrency market have been liquidated in the past 24 hours, with a total liquidation amount of $342 million (approximately 2.45 billion RMB).

On the Second Day of ETF Listing, Bitcoin "Bungee Jumps"

The U.S. Securities and Exchange Commission (SEC) approved the first batch of spot Bitcoin ETFs, which began trading on Thursday, January 11. Bitcoin experienced significant fluctuations throughout the day.

On Thursday morning Eastern Time, Bitcoin surged past $49,000, reaching a new high since December 2021, with an intraday increase of about 6.8%. However, enthusiasm quickly waned, and Bitcoin turned to decline, falling back below $46,000. Related ETFs also followed suit.

After the listing of the spot Bitcoin ETF in the U.S., South Korean financial regulators formally responded, warning domestic brokerages that engaging in any brokerage activities related to foreign-listed Bitcoin spot ETFs may be illegal.

After the U.S. stock market opened on Friday, Bitcoin accelerated its decline, dropping below $44,000, a fall of over $5,000 from the two-year high set on the first day of the ETF listing on Thursday, erasing the gains brought by the optimistic sentiment surrounding the ETF listing earlier in the week. Currently, Bitcoin has fallen over 7%, reported at $42,562.1 per coin.

The poor performance over two consecutive days has resulted in significant losses for investors who jumped in on the first day of listing. For BlackRock's ETF, if $10,000 was invested on Thursday, only $8,300 remains on Friday.

Why the Sharp Decline? What’s Next for Bitcoin?

Renowned U.S. financial commentator Peter Schiff stated:

So far, the sell-off of Bitcoin, Bitcoin ETFs, and other Bitcoin-related stocks has been surprisingly orderly. I wonder when the selling will become more aggressive.

From the capital flow data, in addition to some directly selling Bitcoin for cash, the competition among Bitcoin ETFs is also exceptionally fierce. Funds are shifting from expensive ETFs to cheaper ones:

• Although nearly half of the trading volume of Bitcoin ETFs yesterday came from Grayscale ETFs, which made Grayscale's ETF the third largest by trading volume on record, trading volume does not represent the inflow/outflow of investor funds; in fact, funds from Grayscale's ETF are flowing out.
• As previously mentioned by Wall Street Watch, after the initial promotional period of a fund, Bitwise's BITB charges only a 0.20% fee, the lowest among all ETFs, and has the largest inflow of funds. Other ETFs also have varying degrees of net inflows.

In fact, Bitcoin's poor performance in the past two days resembles a "sell the news" scenario, which some do not find surprising.

Analysts had warned earlier that the market's excitement might be premature. Although the U.S. SEC approved the launch of spot Bitcoin ETFs, the broader investment community still perceives risks in cryptocurrencies. The collapse of the cryptocurrency exchange FTX in 2022 raised investor caution.

Crypto data service provider CryptoQuant stated last month that the long-awaited approval of spot Bitcoin ETFs would trigger sell-offs, as Bitcoin had risen over 60% in the past three months, and the market had already digested this positive news. After the approval of the spot ETF, Bitcoin is expected to pull back to $32,000 next month.

Bitcoin's further decline is also related to many institutions not yet entering the market. Considering the investment risks associated with Bitcoin itself, major institutions like Vanguard, Goldman Sachs, and Bank of America are not yet joining the fray. Due diligence reviews and platform approvals take time before different institutions can purchase these ETFs.

Moreover, although the U.S. SEC has "surrendered and compromised," not all trading platforms can trade these Bitcoin ETFs. Part of the reason may be that these funds have not yet received approval from brokerage compliance departments. A representative from Citigroup reportedly stated that the bank is evaluating products aimed at retail investors. The well-known Vanguard is no exception. Just yesterday, a user expressed impatience, saying they would transfer their pension funds from Vanguard to Fidelity just to buy Bitcoin ETFs.

On the other hand, some investors pointed out that due to the current limited number of institutions in the market and some market participants who want to buy but cannot, this indicates a large potential scale of incremental funds in the future. If more institutions join in, it may ignite a new round of sustained market activity.