Bitcoin Price Plunges After Physical Bitcoin ETF Approval: What Are the Possible Reasons?

Explore the factors that led to Bitcoin's unexpected drop following the physical Bitcoin ETF approval.

From sell-the-news events to GBTC redemptions and miner activities, understand the diverse influences impacting BTC's price movements.

BTC Price Drops to Around $41,500

After the approval of the physical Bitcoin ETF, the price of Bitcoin (BTC) initially surged to around $49,000. However, on January 12, 2024, it temporarily dropped to the vicinity of $41,500.

There are various opinions on how the approval of the physical Bitcoin ETF impacts BTC's price. Although many predicted a surge and a sharp fall following the approval, there was no significant price fluctuation immediately after the approval.

In this article, we will introduce several reasons that have been suggested for this price decline.

Sell-the-News Phenomenon Following ETF Approval

In the investment world, there's a saying, "buy on the rumor, sell on the news." This saying is often cited in relation to Bitcoin's recent drop, suggesting that a "sell-the-news" event occurred following the physical ETF approval.

Since the approval of the physical Bitcoin ETF had been widely anticipated since the end of last year, it's possible that investors who had purchased Bitcoin before the approval sold their BTC for profit after the actual announcement.

Moreover, after the ETF approval, BTC's price experienced short-term rises and falls. It failed several times to break through $47,000 and couldn't surpass $49,000.

This sequence of movements may have heightened investor caution, leading to a large number of BTC being sold on January 13.

Impact of GBTC Redemption Initiation

Some investors and traders have suggested that the initiation of redemptions by Grayscale's GBTC is linked to the BTC price drop.

Ran Neuner, with over 740,000 followers on X, also pointed out this factor, saying, "GBTC holds over $25 billion worth of BTC, and even if only 20% is redeemed, the selling amount in the market would be $5 billion."

BTC Miners Selling Ahead of the Halving

Another reason for the Bitcoin price drop is speculated to be BTC miners selling their holdings in anticipation of the upcoming halving in April 2024.

The halving refers to the event where the reward for Bitcoin mining is halved, and the next halving is expected around April 22, 2024, in about 100 days.

It's reported that "1 billion dollars worth of BTC was transferred to exchanges, and the outflow from BTC miners reached a six-year high" on January 12. This suggests that miner selling may have impacted BTC's price.

Capital Shift from Physical BTC to ETF

Michaël van de Poppe, a well-known analyst with over 680,000 followers on X, has stated that the recent BTC drop might be due to short-term selling pressure from people switching from physical BTC to ETFs.

He considers this movement significant and explains that it could push Bitcoin's price up to $200,000 in the long term. He views the current dip as an opportunity for buying at the bottom.

>> Click here to read the article on price projections.