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Bitcoin faced further declines on Tuesday, slipping below $40,000 to reach its lowest level since the beginning of December. The cryptocurrency’s price was nearly 2% lower at $39,362.00, adding to the 4% decline from the previous day. Bitcoin has fallen about 19% from its post-ETF approval high of $49,048.
Short-Term Selling Pressure: Analysts suggest that short-term selling pressure is arising from exits in the Grayscale Bitcoin Trust (GBTC), with approximately $2 billion in outflows since January 19. However, other bitcoin ETFs, such as BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund, have each seen more than $1 billion in inflows, offsetting the GBTC outflows.
Market Sentiment: Some analysts note that the outflows from GBTC might be affecting the market more on a psychological level than having a significant impact, as bitcoin’s inflow into other ETFs has offset the outflows by $1.2 billion.
“Sell the News” Phenomenon: Investors anticipated a correction following the well-telegraphed approval of bitcoin ETFs, leading to a “sell the news” phenomenon. Traders holding large unrealized profits are now waiting for a more substantial correction.
Key Support Level: Chart analysts identify $36,000 as a crucial support level to monitor in the near term. Despite the current correction, some experts maintain optimism, stating that a new all-time high for bitcoin is still within reach for this year.
Impact on Crypto Market: Bitcoin’s decline has a ripple effect on the broader crypto market. Ether (ETH) fell 7% to $2,170.55, Solana slid 7%, and tokens associated with Uniswap and Ripple’s XRP lost 7% and 5%, respectively. Dogecoin also experienced a 6% decline.
Crypto-Related Equities: Crypto-related equities, including MicroStrategy (down 4%), Marathon Digital, Riot Platforms (each down about 2%), and Coinbase (down 4%), faced pressure. Coinbase’s decline was partly attributed to a downgrade by JPMorgan, expressing concerns about a potential crypto rally fizzle.
Bitcoin’s recent decline below $39,000, influenced by short-term selling pressure and the aftermath of ETF approval, has implications for market sentiment and the broader crypto market. Investors are closely monitoring key support levels, and analysts express a mix of caution and optimism regarding the cryptocurrency’s price trajectory.