Why Are Crypto Prices Falling?
Reading social media it seems many are dismayed by the current pullback, after all the euphoria of the approval of Bitcoin Spot ETFs. There are 3 main reasons why crypto prices are suffering a minor correction, so I’ll explain why.
Firstly, many retail investors, just like you and I, jumped into Bitcoin because they expected a massive pump once Bitcoin Spot ETFs became a reality. My thoughts on the post Bitcoin ETF price was that it would follow the same path that the Gold ETF took, with an initial correction, around 10%, then a steady climb, which is exactly what seems to be happening. If you read again my Bitcoin New Year Price Prediction article, you will see that Bitcoin is doing exactly what it did a few years ago when Bitcoin futures were introduced to the American financial market, and is acting in a similar manner as to the early days of Gold Spot ETFs.
So many of the retail Bitcoin retail investors, who invested into Bitcoin for instant gains, are now selling their Bitcoin and moving on to the next big thing. They will of course all be back when Bitcoin tops $50,000!
Secondly, Greyscale had a big Bitcoin Futures Fund, which before Bitcoin Spot ETF approval had accumulated a value of over 600,000 BTC. Greyscale’s Bitcoin Futures Fund was supposed to track Bitcoin’s price although it never did and most of the time was at a discount to Bitcoin of up to 40% but at an average of 20%. Once Bitcoins Spot ETF’s were approved, Greyscale updated its fund to a Spot ETF fund so had to be backed by actual Bitcoin. Many suggest that Greyscale had been buying Bitcoin prior to the January 10th approval date which also pushed up Bitcoins price. Once the Spot ETFs were approved, the discounted Bitcoin futures matched Bitcoin’s price, which of course meant many in the fund were sitting on a big profit, as they bought the initial Bitcoin Futures at a big discount, so of course many are selling. Add to this Greyscale are charging 1.5% on their Bitcoin Spot ETFs, compared to around 0.025% for most other Bitcoin Spot ETFs and you should understand why many are selling their Greyscale Bitcoin ETFs.
Thirdly, many Bitcoin Miners have been hoarding their mined Bitcoin with the surge in the Bitcoin price. These also have been dumped on the market too, which of course has an impact on the short term price. And remember, the price of Bitcoin has a bearing of ALL crypto, especially projects likes Stacks which works “hand in hand” with Bitcoin.
So there is no need to panic! Bitcoin ETFs are a roaring success, and have already become the second most popular ETFs in the US. The actual amount of Bitcoin available to buy on exchanges around the world is dropping to historic lows which will have an impact on Bitcoin’s price in the near future.
So What’s Next?
More and more Bitcoin will locked away in Spot ETFs, Miners will start to hoard Bitcoin again as the halving is just 100 days away creating historic low supplies. Add to this, attention will soon start to focus on Ethereum Spot ETFs with a deadline of mid May which of course is massive for Ethereum and layer 2s such as Polygon. And also don’t forget Stacks are due to release their Nakamoto update BEFORE the halving which could well be one of the biggest ever developments in the crypto world!
Exciting times!
