Bitcoin: Bitcoin, the biggest cryptocurrency out there, has just hit its steepest monthly drop in three years. This month alone, the digital currency has plummeted over 21%, marking its largest fall since June 2022. The reasons behind this decline are mainly threefold: investors cashing in their profits and the possibility of a rate cut.
The shine of Bitcoin has been dulled by the swift withdrawals from its ETFs. BlackRock’s iShares Bitcoin Trust (IBIT) took the hardest hit from this situation. In November, IBIT experienced net withdrawals nearing $3 billion, which included a record-breaking withdrawal of $523 million in just one day. Overall, IBIT faced a total monthly withdrawal of $2.1 billion in November, accounting for about 71% of all Bitcoin ETF withdrawals. In total, the spot Bitcoin ETF lost almost $3 billion in value, while the Ethereum ETF also experienced withdrawals amounting to $1.79 billion. On the flip side, some niche funds like Solana actually saw more investments than withdrawals during this time.
Market analysts suggest that the crypto market was rattled when a major Bitcoin holder sold off around $1.3 billion in holdings in late October and early November. The market further declined due to weak macroeconomic indicators and low expectations for an interest rate cut from the US Fed. Increased volatility in the AI and tech sectors also spilled over into the crypto market.
The withdrawals from ETFs and a drop in institutional holdings further tarnished the appeal of the crypto market. Additionally, the holdup of a bill concerning the crypto market in the US Congress added to the uncertainty and led to disappointment among crypto investors.
What are market experts saying about Bitcoin’s decline?
Anil Kumar Bhansali, who leads the treasury at Finrex Treasury Advisors LLP, mentioned that the drop in Bitcoin below crucial technical thresholds led to ETF outflows, reduced hopes for a Federal Reserve rate cut, and a rise in institutional short-selling. Ritesh Jain, the founder of PineTree Macro, pointed out that retail interest in Bitcoin, which usually flows through ETFs, has decreased.
Moreover, selling from investors who have owned Bitcoin for over a decade has also added to the downward pressure. Ritesh notes that although he doesn’t have any long-term plans for Bitcoin right now, in the short term, it has entered an oversold territory and is expected to stabilize around its current value, at least until the upcoming US Fed meeting.