Bitcoin Endures Worst Month in Over a Year Amid Fading ETF Hype
Bitcoin has faced its most difficult month since the collapse of FTX, the empire of Sam Bankman-Fried, as the excitement surrounding US spot Bitcoin ETFs continues to diminish.
In April, the value of the cryptocurrency dropped by almost 16%, only slightly better than the decline seen in November 2022, according to data compiled by Bloomberg.
The surge in demand driven by the anticipation of ETFs propelled bitcoin to an all-time high of nearly $74,000 in March. However, as optimism for Federal Reserve interest-rate cuts faded and risky investments lost their appeal, inflows to these products significantly decreased.
Spot Bitcoin ETFs witnessed outflows of $182 million in April. A sharp drop of around 5% on Tuesday pushed bitcoin to around $60,000 and had a ripple effect on the rest of the crypto market. Smaller cryptocurrencies such as Ether, Solana, and meme coins experienced even larger losses, while shares of crypto companies also closed lower.
Throughout April, there was a net outflow of $182 million from the 11 US spot ETFs, in stark contrast to the net inflow of $4.6 billion recorded in March.
The approval of these funds by the US Securities and Exchange Commission (SEC) in January had exceeded expectations and opened up a new avenue for engagement.
The highly anticipated Bitcoin halving, which occurs every four years and reduces the supply of new coins, had minimal impact this time when it took place on April 19. While it did not directly affect transaction processing, it did cut the amount of new Bitcoin awarded to miners in half.
Crypto mining stocks suffered greater declines than bitcoin itself. Companies like Marathon Digital Holdings Inc., Riot Platforms Inc., Cleanspark Inc., and Cipher Mining Inc. experienced drops ranging from 7.9% to 11%. MicroStrategy Inc., known for its corporate Bitcoin strategy, also saw an 18% decline after reporting a first-quarter loss of $53 million due to an impairment charge against the value of its bitcoin holdings.
Market observers had hoped for a boost from Asia, focusing on the listing of bitcoin and ether spot ETFs in Hong Kong. However, the debut on Tuesday failed to inspire confidence, with the six new ETFs collectively generating only $11 million in trading volume during the first session. This is significantly lower compared to the $4.6 billion total volume achieved by the ten US spot Bitcoin products during their debut.
Ether, the second-largest cryptocurrency, experienced an 18% decline in April, marking its largest monthly drop since June 2022. The SEC’s request for information from various companies in March as part of its review of Ether, along with a recent lawsuit by crypto software company Consensys challenging the SEC’s regulatory authority over Ethereum and Ether, have further intensified the legal battles between the crypto industry and the regulatory agency.
Other smaller and more volatile tokens like Dogecoin and Polkadot also experienced significant declines on Tuesday. These alternative coins, known as altcoins, tend to outperform bitcoin during rallies but fall more sharply during market downturns.
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