What is the reason for today’s drop in cryptocurrency? The selling off of GBTC.
In the midst of ongoing market turbulence, the global cryptocurrency market cap has seen a staggering $40 billion decrease in value over the past 24 hours. Major assets like Bitcoin (BTC) and Ethereum (ETH) have experienced significant drops, contributing to the overall market panic.
The downward trend began on January 12, following the initial excitement surrounding the potential approval of a spot Bitcoin ETF. Since then, both institutional and retail investors have been selling off their holdings, leading to a wave of panic across the market.
According to data from Santiment, market sentiment has taken a significant hit. While social activity within the crypto community has increased, the focus has primarily been on buy and sell mentions. However, despite the market decline, many participants are adopting a “buy the dip” strategy, with buy mentions accounting for 3.61% of the total social volume and sell mentions making up 1.83%.
Yesterday, the market suffered a significant setback when Bitcoin dropped below the crucial $40,000 support level. This level had been defended since the beginning of the year until January 22, when it fell to $39,700. Although Bitcoin quickly recovered the $40,000 support, a resurgence of bearish pressure has once again caused a market drop. Currently, Bitcoin is trading at $39,734, representing a 3.7% decline in the past 24 hours.
Bitcoin’s decline has had a ripple effect on the rest of the market, with Ethereum experiencing a 4.11% drop in the past day, bringing its price to $2,307 at the time of reporting. Yesterday, Ethereum recorded a significant intraday loss of 5.11% as bears targeted the $2,300 support level, aiming to trigger further declines.
The market bloodbath has been worsened by massive selloffs from the Grayscale Bitcoin Trust (GBTC) shortly after the ETF approval. Notably, FTX’s sister company, Alameda, recently withdrew its case against Grayscale. However, data indicates that FTX also sold off 22 million GBTC shares, adding to the bearish pressure on Bitcoin and the broader market. Additionally, institutional investors have been dumping their GBTC shares, leading to further selloffs of Bitcoin.
Grayscale recently transferred $1.3 billion to Coinbase, the custody service provider for GBTC. With an outflow of $2 billion from the ETF, market analysts have pointed out that the product’s high fee of 1.5% and the absence of its significant discount have contributed to the investor exodus.
Amidst this ongoing onslaught, CryptoQuant data shows that exchange net flows have recently become more bullish, with deposits on exchanges lower than the weekly average. This pattern suggests that the selloff campaign may be slowing down.
As the market continues to face challenges, it remains to be seen how the situation will develop in the coming days.
