• After the U.S. approved its first Bitcoin ETF, bitcoin’s price dropped by over 25% this month.
  • Various factors contribute to Bitcoin’s recent price drop, including substantial investments in new bitcoin ETFs.
  • A recent survey conducted by Deutsche Bank suggests that over one-third expect a drop below $20,000 by year-end. Still, some remain optimistic.

Following the approval of the United States’ first spot bitcoin exchange-traded fund (ETF), bitcoin’s price experienced a decline of over 25% from its peak earlier this month.

ETF hangover

The largest cryptocurrency in the world is currently trading at $38,900, down 20.6% from its three-year peak of $49,000 reached on January 11 following the U.S. Securities Exchange Commission’s approval of spot bitcoin ETFs.

Applying certain conventional market terms to cryptocurrency, such as calling a 20% or more decline in a broad market index from its recent peak a “bear market,” might seem inaccurate. In fact, bitcoin is still in its correction phase. Because of its extreme volatility, corrections occur far more frequently in the bitcoin market than in the stock or other traditional markets. It typically restores the price to its long-term, established trend following a rise.

Also read: U.S. bitcoin ETF approval sees $4.6 billion trading volume on launch day

Diverse influences on bitcoin’s recent price drop

A wide range of explanations is put up regarding the decline. Money has poured into the new spot bitcoin ETFs, mostly into BlackRock and Fidelity, totaling close to $4 billion. However, $2.8 billion of those were attributed to withdrawals from Grayscale. Deutsche Bank analysts claim the amount of assets from the defunct cryptocurrency exchange FTX will be a factor in bitcoin’s price drop.

Also read: BlackRock’s bitcoin ETF hits $1B in 4 days

Unlike expected

Standard Chartered suggested last year that the era of the “crypto winter” had passed. However, judging by their predictions, the notion that the introduction of ETFs would propel bitcoin to a new all-time high, perhaps even reaching $100,000, seems somewhat uncertain this year.

In a recent survey conducted by Deutsche Bank in the U.S., UK, and the Eurozone, more than one-third of respondents believe that bitcoin will fall below $20,000 by year’s end.

The director of global macro at Fidelity, Jurrien Timmer, expressed optimism about bitcoin’s longer-term prospects, speculating that this could usher in a new era in its widespread use as a commodity currency, though he conceded that this might not happen right away. Timmer commented on the media: “Will this be a new chapter towards bitcoin’s widespread adoption as a commodity-currency?”

Also read: Spot bitcoin ETFs attract nearly $2 billion in first 3 days of trading