Decline in Major Cryptocurrencies Led by Solana and Cardano Amidst Bitcoin Grayscale Sell Off

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This week began on a somber note for major cryptocurrencies, with a notable decline as a result of ongoing worries about substantial sales of bitcoin (BTC). This anxiety is causing investors to reduce their positions in the wider cryptocurrency market, bracing for potential price drops. The CoinDesk 20 index, reflecting the market’s top cryptocurrencies, saw a decrease of 2.86% over the past 24 hours.

Alts go low

In this downward trend, Solana’s SOL and Cardano’s ADA experienced a significant decrease, each dropping by 5% in the last 24 hours. As a result, SOL is currently priced at $111 on Gate.io. These losses were among the highest in the major cryptocurrencies. Meanwhile, BNB from BNB Chain showed relative stability, possibly due to its demand for launchpads that necessitate the token on the Binance crypto exchange. Dogecoin (DOGE), although initially resisting the market’s downward trend, has seen a decline in the past hours, following earlier speculation about its incorporation in a forthcoming feature on a popular social application. The price of DOGE now hovers around solid $0.9, which is a downturn from the token’s performance only a week ago. 

Bitcoin, the largest cryptocurrency by market capitalization, lost its support level of $41,000 early on Monday. Market analysts anticipate that its price could plummet to around $38,000 in the upcoming weeks, potentially leading to further declines in other digital currencies.

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The recent downward trend in bitcoin’s value is believed to be influenced by sales from the Grayscale GBTC bitcoin exchange-traded fund (ETF), as suggested by analysts including Bloomberg’s Eric Balchunas. According to data from analysis firm Arkham, Grayscale’s verified wallets moved over $400 million in bitcoin to the Coinbase Prime custodian last Thursday. This move is possibly a precursor to a future sale.

In contrast, other newly authorized bitcoin ETFs are experiencing net inflows. BlackRock’s IBIT and Fidelity’s FBTC ETFs surpassed $1 billion in the last week, as per data from CoinGlass. This indicates a growing buying pressure in the market.

BTC outflows and inflows hint the trend

This week, Bitcoin experienced a significant downturn, plummeting over 14%, despite the recent landmark approval of spot cryptocurrency exchange-traded funds (ETFs). The digital asset management firm Grayscale, a subsidiary of the prominent Digital Currency Group, seems to play a substantial role in this decline.

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Following its transformation into a Bitcoin ETF with the Securities and Exchange Commission’s (SEC) approval, Grayscale’s Bitcoin Trust (GBTC) has witnessed a massive exodus of investors, a move that has left market analysts astounded by the scale of the sell-off.

Grayscale’s Bitcoin ETF, which debuted last week alongside 10 other comparable products, previously functioned as a closed-end fund, prohibiting investors from exchanging their shares for actual Bitcoin. However, the transition to an ETF format has led to investors withdrawing their funds on a large scale.

In the initial days following its launch, over half a billion dollars were withdrawn from the fund. Bloomberg reports that in the last five days, outflows have exceeded $2.2 billion. Contrastingly, other ETFs are attracting investments. For instance, BlackRock’s iShares Bitcoin Trust (IBIT) leads with $1.2 billion in new investments.

A senior ETF analyst at Bloomberg, expressed surprise at the substantial outflows from GBTC. The mass withdrawal is primarily attributed to traders liquidating their positions for profit, having been previously confined to the fund. Notably, GBTC charges the highest fee among U.S. spot Bitcoin ETFs, at 1.5%, compared to BlackRock’s IBIT, which currently charges 0.12% (set to increase to 0.25% in 12 months).

This high fee structure is cited as another reason prompting investors to withdraw their funds. The exodus from GBTC has led Grayscale to transfer significant amounts of Bitcoin to Coinbase, its custodian, for sale, subsequently affecting Bitcoin’s market price. Data from Arkham Intelligence reveals that Grayscale has moved approximately $500 million worth of Bitcoin to Coinbase in just six hours.

Head of research at European asset manager CoinShares, links these outflows to the recent drop in Bitcoin’s price. He mentioned that the sell-off by GBTC holders and the fund’s comparatively higher fees are crucial factors.

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