‘Critical’ Price Level Revealed After $300 Billion Ethereum, Solana And XRP Crash
1/23 update below. This post was originally published on January 22
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The bitcoin price crashed back toward $40,000 per bitcoin despite BlackRock’s
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Now, as the market braces for an Elon Musk bombshell, bitcoin and crypto traders are nervously eyeing outflows from Grayscale’s bitcoin trust (GBTC), freshly converted into a fully-fledged spot bitcoin ETF—with JPMorgan warning $1.5 billion could still be yanked from the fund in coming weeks.
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The bitcoin price has swung wildly since the approval of a raft of spot bitcoin ETFs, crashing back … [+]
“Bitcoin looks mad heavy,” Arthur Hayes, the founder of crypto derivatives pioneer Bitmex who is now the chief investment officer of a fund called Maelstrom, posted to X. “I think we break $40,000 [per bitcoin], Hayes predicted, adding he sees the bitcoin price continuing to fall through until January 31 when there’s a U.S. Treasury quarterly funding announcement.
1/23 update: The bitcoin price has crashed under $40,000 per bitcoin, driving down the price of other major cryptocurrencies ethereum, XRP and solana, with the combined crypto market losses since the approval of a fleet of spot bitcoin ETFs just two weeks ago now at $300 billion.
“The next crucial price levels for bitcoin that could provide support are estimated to be between $38,000, which is close to the short-term holder realized price for bitcoin at $38,307, and $36,000,” according to a report by Bitfinex analysts.
The bitcoin price has now lost 20% since the U.S. Securities and Exchange Commission (SEC) gave the green light to 11 closely-watched spot bitcoin ETFs on January 10, a landmark that some crypto supporters had been working toward for a decade.
“Bitcoin’s technical outlook has turned bearish now as the spot bitcoin price closed below the lower bound of ‘ichimoku cloud’–a key technical support,” Yuya Hasegawa, bitcoin and crypto market analyst at Tokyo-based Bitbank, said in emailed comments.
“The bearish market sentiment and technical outlook could put further pressure on bitcoin in the coming days unless the price quickly recovers and closes above $40,000. If that fails, the price could continue to drop, and the next spot will likely be $38,000.”
The bitcoin price—along with the price of ethereum, XRP and solana—have come under pressure in part due to fears outflows from Grayscale’s flagship GBTC could accelerate.
“If the previous $3 billion estimate proves correct and given $1.5 billion has exited already, then there could be an additional $1.5 billion still to exit the bitcoin space via profit-taking on GBTC, thus putting further pressure on bitcoin prices over the coming weeks,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a note seen by The Block.
The value of Grayscale’s GBTC has rocketed along with rising expectations it would be granted full spot bitcoin ETF status by the U.S. Securities and Exchange Commission (SEC) in recent months.
Those that have bought into GBTC over that last few years are now “taking full profit post-ETF conversion by exiting the bitcoin space entirely rather than shifting to cheaper spot bitcoin ETFs,” JPMorgan analysts said.
“Liquidity and market depth also matter, but again there is risk for GBTC on that front also if other spot bitcoin ETFs manage to reach critical mass in terms of size and liquidity,” the analysts wrote, finding GBTC could see a further $5 billion to $10 billion of outflows if it loses its liquidity advantage.
A fee war has broken out among spot bitcoin ETF issuers, with the likes of BlackRock and Fidelity offering rock-bottom fees for those who want to buy shares, driving demand for alternatives to Grayscale’s GBTC.
“At the time of conversion, GBTC held approximately 620,000 bitcoin, which has now reduced to roughly 552,000 bitcoin,” Matteo Greco, research analyst at investment company Fineqia International, said in emailed comments.
“The strong outflow can be attributed mainly to two factors: firstly, GBTC customers were restricted from redeeming shares and could only sell them on the secondary market due to the product’s structure, before the conversion. This compelled many customers to hold their positions for years without an exit option unless they were willing to sell at a significant discount in the secondary market. Secondly, the higher management fee set by Grayscale (1.5%) compared to most competitors (0.2%/0.3%) led some investors to withdraw their investment from Grayscale, either to cash in profits or reinvest in more cost-effective ETFs.”
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The bitcoin price has swung wildly in recent months as spot bitcoin ETF hype pushes up bitcoin, … [+]
However, despite the wild swings hitting the bitcoin price and the weighing on the price of other major cryptocurrencies ethereum, XRP and solana, many working in the crypto space remain upbeat.
“While the short-term impact [of the spot bitcoin ETF approval] is unclear and may cause volatility over the medium term, my personal view is that the increased access for retail investors, and alignment from institutions to adopt and promote a new asset class, is certainly positive,” Jason Lau, chief innovation officer at the OKX exchange, said in emailed comments.
“I believe that the widespread acceptance of bitcoin will ultimately drive more users to interact with bitcoin itself and benefit from the power of a decentralized, permission-less network.”
