Bitcoin briefly fell below $39,000 on Tuesday, extending its recent decline and falling more than 20% from its high earlier this month. On January 12, the U.S. Securities and Exchange Commission (SEC) approved the first batch of spot Bitcoin ETFs, causing Bitcoin to soar to $49,000 that day, the highest level in three years. However, Bitcoin fell to as low as $38,900 on Tuesday, down 20.6% from its previous three-year high. As of press time, Bitcoin has risen above $39,000 again.
Analysts at cryptocurrency exchange Bitfinex wrote in a report on Tuesday: "With bearish sentiment appearing to be widespread, the next key price level where Bitcoin may provide support is estimated to be between 36,000 and 38,000."
Analysts at Deutsche Bank said nearly $4 billion flowed into new spot Bitcoin ETFs, particularly those run by BlackRock and Fidelity, with $2.8 billion coming from outflows from Grayscale (formerly a fund, now an ETF), which previously dominated the regulated Bitcoin investment market.
As for the reasons for Bitcoin's recent decline, Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors, explained that in the past two weeks, Bitcoin has been challenged by more severe macroeconomics (evidenced by rising interest rates and a stronger U.S. dollar), traders unwinding GBTC arbitrage positions, and selling pressure caused by the sale of assets by the bankrupt cryptocurrency exchange FTX.
Farrell added that the sale of assets by FTX could reverse the oversupply situation, which means that the huge selling pressure from GBTC may soon subside.
Leah Wald, CEO of digital asset investment firm Valkyrie Investments, said: “The outflow of GBTC has created a dynamic in the market that needs to normalize before we see real price discovery.”
Bitcoin soared nearly 160% last year, outperforming traditional assets such as stocks, but is still about $30,000 below its all-time high of nearly $69,000 set during the 2021 coronavirus pandemic.