It was supposed to be a historic moment for the crypto industry: traditional finance was finally interested in Bitcoin. Companies like Blackrock and Fidelity were providing a way for regular investors to add exposure to Bitcoin in any investment account. It was a decision we had been waiting on for years. Billions of dollars of funds would flow into these spot Bitcoin ETFs and cause a major demand spike, sending our crypto token prices higher. So what went wrong?
Earlier this week, the SEC finally approved the trading of spot Bitcoin ETFs in the US markets. Trading volume for these 11 ETFs hit more than $4 billion in the first two days. Yet, crypto prices tanked as Bitcoin fell nearly 15% from peak to trough, and the global crypto market cap fell by more than 5.0% in less than 24 hours. Non-crypto holders were laughing and calling it a rug pull. Sell the news officially became a meme and then it became a reality.
Crypto-related equities tumbled as shares of Coinbase ($218.16|-7.68%) fell by nearly 20% this week. Coinbase is the trusted custodian for most of the spot Bitcoin ETFs and was a major player in helping these companies get their applications approved. Is it time to panic? Or is this just a spot of volatility before we moon again?
Sell the News Will Shake Out Weak Hands
I don’t think this is the death knell for the crypto industry that some people are calling for. It is concerning but there was so much anticipation for this that the prices of cryptos rallied hundreds of percentage points over the past few months. In other words, some steam needed to be let out of the kettle.
If you think spot Bitcoin ETFs are bad for the crypto industry, then I’m not sure what to say. There was certainly some volatility expected as spot Bitcoin shifted around and funds exited centralized exchanges for the perceived safety of brokerage accounts. It was never going to be a smooth transition.
The same thing happened when the Bitcoin futures ETF began trading. It also marked an all-time high top for Bitcoin when Coinbase had its IPO in April 2021. The crypto industry loves to sell the news. Do you know what they love to do even more? Buy the dip.
I’m not saying we’re going straight back to all-time highs. I do think that this is just a temporary period of volatility that needs to be taken in stride. Bitcoin is re-testing some key levels of resistance while Coinbase’s stock needed to see a pullback to some key moving averages. Currently, the $115 price level is a gap fill that is acting like a magnet and would be an excellent area for resistance to turn into support.
As for Bitcoin, I truly think the best is yet to come and sooner rather than later. Companies like Blackrock do not get into an asset class if they don’t think it won’t make them money. Bitcoin is a real asset now but most of all it can make them a profit. Ride the waves now and dollar-cost average, because I think this will all be in the rear-view mirror sooner than most people think.
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