The upward trend that propelled the price of Bitcoin to unprecedented levels and attracted new investors thanks to easily accessible exchange-traded funds has reversed course completely after officially entering loss territory.
Investors in exchange-traded funds (ETFs) within US exchanges, which allow them direct ownership of the most popular digital currency, are now facing widespread losses.
Sean Rose of GlassNode estimates that the average purchase cost across all inflows into these funds is around $89,600, a level that Bitcoin fell below during Tuesday's trading, meaning the majority are now in loss territory.
Average prices and changes in investment sentiment
This figure represents the weighted average price based on the money flows that have entered the funds since their launch, and therefore, a drop in Bitcoin below this level puts new investors in negative territory.
However, one piece of news remains positive, as the quantities purchased when the price ranged between $40,000 and $70,000 are still making gains so far, according to Rose.
This rapid shift highlights the decline in optimism in the cryptocurrency markets. After Bitcoin hit its historic highs in early October, it has now fallen by more than 30%, under pressure from risk-averse investors and a widespread sell-off by long-term holders of the currency.
A decline that unsettles Wall Street
Although cryptocurrencies are known for their sharp fluctuations, the recent decline came as a surprise to Wall Street, especially given the huge influx of institutional capital into the sector following Donald Trump's victory in the US elections.
This decline poses a real test of the resilience of individual and institutional investors, many of whom profited last year from the strong momentum of cryptocurrencies amid expectations of further gains. While exchange-traded funds (ETFs) are considered a more regulated and less risky investment vehicle compared to traditional methods of buying cryptocurrencies, the recent drop serves as a reminder that extreme volatility has never truly disappeared from this market.
Billions of dollars have flowed into Bitcoin-backed exchange-traded funds (ETFs) this year, boosting their popularity and prompting issuers to launch new instruments that go beyond those linked to major cryptocurrencies like Ethereum. According to data compiled by Bloomberg, more than 110 cryptocurrency-backed ETFs are currently trading in the United States.
The 12 funds dedicated to Bitcoin have seen net outflows of around $2.8 billion since the beginning of November, reflecting the extent of the pressures currently facing the digital asset market and indicating continued apprehension among investors due to the lack of a clear vision for future prices.
