We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. Learn more.
Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.
Bitcoin began the year primed for growth. Big things were on the horizon in 2024 — including the long-awaited approval of bitcoin spot ETFs. But the cryptocurrency community notched that victory in early January, and bitcoin isn’t hurtling into the stratosphere. In fact, it has lost $7,000 in value since the news broke.
Here’s why that happens — and what you should know about buying bitcoin right now.
Ads by Money. We may be compensated if you click this ad.Ad
Build your ultimate crypto portfolio
Coinbase provides a versatile crypto trading platform suitable for all levels of investors, offering both power and user-friendliness in one space. Start your investment journey today by clicking on your state below!
Start Investing
Bitcoin drops in days following spot ETF approvals
On Jan. 10, the U.S. Securities and Exchange Commission gave the crypto market exactly what it wanted: approval for a spot bitcoin ETF. These exchange-traded funds allow investors to get exposure to bitcoin’s steep rises (and its troughs) without having to actually own the asset, so crypto optimists expected them to bring in lots of new capital (BTW: Financial advisors generally suggest investors devote no more than 5% of their portfolio to risky assets like crypto).
The news was massive, given that bitcoin fans have been asking for these ETFs for years. The fervor reached a peak recently, with Grayscale taking the SEC to court over its denial of the company’s ETF and finance giants like BlackRock and Fidelity applying for their own. In total, 11 companies saw their applications approved. Crypto enthusiasts predicted a 2021-esque bull run.
Indeed, in the days after the SEC's approval, over $2 billion flowed into bitcoin ETFs. But bitcoin prices themselves sunk. Immediately afterward, the crypto shot up by about $3,000 to a price of $48,600; since then, it has dropped down to $41,000 — its lowest price since early December.
How 'selling the news' turns good news into losses
Cryptocurrency prices are far more volatile than stocks, but their general movement tends to align closely with the stock market. It makes sense, then, that the crypto market suffers from many of the same peculiarities as stocks. One such quirk is that if a stock performs strongly during earnings season, smashing expectations, there’s a chance that shares will still depreciate.
This counterintuitive phenomenon is caused by “selling the news,” or the act of profit-taking by shareholders after good news breaks. Active investors might opt to take the short-term profits of good news instead of holding on for future gains. It’s not an act that’s inherently harmful when done by an individual, but a large group of traders selling their shares at once can easily influence prices.
And when a group of sellers is larger than the group of potential investors, the flood of shares back into the market can cause a shift in supply and demand that drives share prices lower as a result.
This helps to explain how bitcoin suffered at the hands of its own success. Bitcoin spot ETFs have been sought out for over 10 years (and for the last two years especially). As it became increasingly more probable that these ETFs would see approval in January, it’s likely that active traders loaded up on bitcoin ahead of time with the expectation that they could take profits on the post-approval boom.
We can see this reflected in not just the price of bitcoin declining but also the billions of dollars in outflows from exchanges and crypto funds. Grayscale reportedly saw over $2 billion in liquidations from its bitcoin-trust-turned-bitcoin-ETF after the SEC approved it.
All said, does the decline in bitcoin’s signal that the ETF news isn’t actually as good as once believed? Not really.
Experts still anticipate spot funds for bitcoin will unlock the market for a ton of new investors and send prices back toward all-time highs. They see these losses as just a small setback in the bullish bigger picture; if anything, potential bitcoin investors may take the opportunity to buy bitcoin while it's quote-unquote "discounted."
Newsletter
Make smarter money decisions in just a few minutes every day
Subscribe to Daily Money to get more of the latest personal finance news, stories, and analysis delivered everyday to your inbox.
More from Money:
What's Next for Tech Stocks Now That Microsoft Has Overtaken Apple?
Investing Outlook: Expert Predictions for the Markets and More in 2024
Why Some Crypto Experts Predict Bitcoin Will Soar to Record Highs in 2024
SHOWHIDE
Ads by Money. We may be compensated if you click this ad.Ad
Start investing in crypto with Coinbase
FAQs
Bitcoin and other cryptocurrencies were falling Friday despite the virtual confirmation of approval for exchange-traded funds holding spot Ether. A potential delay to the launch of the ETFs and scaled back expectations for interest-rate cuts look to be hurting the crypto sector.
How will ETFs affect bitcoin? ›
Increase prices.
While a spot bitcoin ETF does not directly affect the price of bitcoin, the increased demand and purchasing of bitcoin by these ETFs could boost the price over time.
Why sudden drop in bitcoin price? ›
The overall cryptocurrency market, including Bitcoin, has experienced price fluctuations due to unforeseen macroeconomic headwinds and the recent impact of Spot ETH ETFs.
What does bitcoin ETF approval mean? ›
“The ETF approval also provides a credible stamp of approval for large institutions and market participants that were waiting for an easier way to access the asset class rather than buying crypto directly, which always has inherent price and custody risks.”
Is it better to buy bitcoin or ETF? ›
Crypto ETFs vs.
Investing in crypto ETFs and directly buying crypto provide exposure to cryptocurrency. However, there are many differences between the two. For many investors, the simplicity of using crypto ETFs will offset its drawbacks, such as higher fees and less control.
Will the SEC ever approve a bitcoin ETF? ›
What are they and what does it mean for investors? The US securities regulator has approved the first US-listed exchange traded funds (ETF) to track bitcoin, in a watershed moment for the world's largest cryptocurrency and the broader crypto industry.
Why is BlackRock buying Bitcoin? ›
Throughout the years and especially during the pandemic, BlackRock's clients started asking the firm for low cost and easy access to bitcoin. BlackRock started studying the industry to develop a digital asset strategy.
Which ETF is best for Bitcoin? ›
- iShares Bitcoin Trust (IBIT)
- ProShares Bitcoin Strategy ETF (BITO)
- Roundhill Bitcoin Covered Call Strategy ETF (YBTC)
- Global X Blockchain ETF (BKCH)
- VanEck Ethereum Strategy ETF (EFUT)
- ProShares UltraShort Bitcoin ETF (SBIT)
- ProShares Ultra Bitcoin ETF (BITU)
Another form of diversification is investing in assets with low correlation. Assets with low correlation tend to move in different directions, so for instance when stocks are up, Bitcoin or a Bitcoin-linked ETF tend to be down. This further diversifies your portfolio, and can help you weather market bumps over time.
Why is Bitcoin price crashing? ›
Last week, a weaker than expected U.S. job report sparked a bitcoin price crash, with the slowing jobs market fueling fears the Federal Reserve has waited too long to cut interest rates and could have tipped the economy into recession.
Top 10 Cryptos in 2024
| Coin | Market Capitalization | Current Price |
|---|
| Ethereum (ETH) | $287.89 billion | $2,393 |
| Binance Coin (BNB) | $73.99 billion | $507.14 |
| Solana (SOL) | $62.45 million | $133.76 |
| Ripple (XRP) | $30.62 billion | $0.54 |
6 more rowsSep 6, 2024
Daily Bitcoin (BTC) Price Prediction For Today, Tomorrow, this Week, and Next 30 Days. Based on your price prediction input for Bitcoin, the value of BTC is projected to increase by 5%, potentially reaching $ 58,000.54 in the next 30 days.
How does ETF affect Bitcoin price? ›
The primary risk of spot Bitcoin ETFs lies in Bitcoin's inherent volatility, which can lead to significant fluctuations in the ETF value. Investors must be prepared for rapid price changes and potential losses. Additionally, ETF management involves fees, such as expense ratios, which can impact overall returns.
Is Bitcoin ETF approved in the US? ›
The U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin exchange-traded funds (ETFs) on January 10, 2024, marking a significant milestone in the world of cryptocurrency and investment.
What's the point of Bitcoin ETFs? ›
Bitcoin futures ETFs are funds that bundle Bitcoin futures contracts. They provide investors without the means or desire to invest directly in cryptocurrency a way to gain exposure to these volatile and sometimes lucrative assets. You can purchase them on official exchanges.
Why am I losing money on ETFs? ›
Market risk
The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment. So if you buy an S&P 500 ETF and the S&P 500 goes down 50%, nothing about how cheap, tax efficient, or transparent an ETF is will help you.
Should I add bitcoin ETF to my portfolio? ›
Another form of diversification is investing in assets with low correlation. Assets with low correlation tend to move in different directions, so for instance when stocks are up, Bitcoin or a Bitcoin-linked ETF tend to be down. This further diversifies your portfolio, and can help you weather market bumps over time.
What happens if ETF collapses? ›
Because the ETF is a separate legal entity from the issuer that manages it, the ETF will control all the assets in its portfolio up until the date set for its liquidation, at which point the manager will sell the assets and distribute the proceeds to investors.
What is the prediction for bitcoin ETF? ›
Based upon bitcoin's price history, and with tens of billions of dollars expected to flow into spot bitcoin ETFs in 2024, BTC could surpass its $65,000 high, with crypto services firm Matrixport predicting $120,000 by year's end.
