Bitcoin continued its decline as traders assessed the potential market response if regulators approve the launch of the first US exchange-traded funds that invest directly in the cryptocurrency as expected.
The largest digital asset fell by 2.4% over the past 24 hours and reached $42,400 at 10:31 am today, Wednesday, Singapore time.
Overall, Bitcoin's price has risen 156% since the beginning of this year, a rise fueled in part by bets that ETFs will encourage new demand.
But a key concern is whether regulatory approval of these funds will actually spur some profit-taking in cryptocurrency, based on the adage that investors buy the rumors and sell the news.
In other words, potential interest in spot Bitcoin ETFs planned by firms like BlackRock and Fidelity Investments remains to be seen.
Volatility of investing in cryptocurrencies
Nick Carter, co-founder of Castle Island Management, said on Bloomberg TV that the market is almost certain that the US Securities and Exchange Commission will approve the launch of spot ETFs in Bitcoin before January 10. He added that these funds will expand the base of cryptocurrency investors in the medium term, but he points out the possibility of a wave of selling emerging as a result of this news in the near future.
Smaller digital currencies such as Avalanche and Solana recorded losses greater than Bitcoin during the past 24 hours, while currencies favored by meme investors such as Dogwifhat also declined. As for Binance Coin (BNB), which is affiliated with the Binance Exchange, it was able to survive the sell-off and rose 10%.
Bitcoin's rise this year was also driven by expectations of interest rate cuts in the United States. This rise partially offset the decline recorded by the currency as a result of the severe collapse it suffered in 2022 and which resonated throughout the cryptocurrency sector. The cryptocurrency is still below the record level it reached during the pandemic era in 2021 at about $69,000.
