Bitcoin faces worst month since FTX crash with ETF demand cooling (2024)

Bitcoin registered its worst month since the collapse of Sam Bankman-Fried’s FTX empire as the euphoria around US exchange-traded funds (ETFs) for the largest digital asset subsides.

The original cryptocurrency slumped almost 16 per cent in April, just a hair below the decline seen in November 2022.

The US-ETF induced mania took Bitcoin to a record high of almost US$74,000 in March, but as demand for risky investments takes a knock from fading hopes for Federal Reserve interest-rate cuts, inflows to the products have come down significantly.

An almost 5 per cent swoon to around US$60,000 by Bitcoin on Tuesday weighed on the remainder of the crypto universe, with deeper losses seen by smaller rivals such as Ether and Solana to memecoins. The shares of so-called crypto companies closed lower.

As at April 29, the month has seen net outflows of US$182 million (S$248.5 million) from the 11 US spot ETFs. The funds saw US$4.6 billion in net inflow in March. The US Securities and Exchange Commission (SEC) approved the funds in January.

“ETFs created a new avenue for engagement that has been wildly popular, much more popular than anyone’s expectations,” Mr Seth Ginns, Coinfund’s managing partner and head of liquid investments, said during a Bloomberg Television interview on April 29. That “led to Bitcoin moving up very quickly, much further than what has been anticipated”.

The much-anticipated Bitcoin halving, a quadrennial event that reduces the supply of new coins in the market and historically acted as a price tailwind, had minimal impact since it happened on April 19. Although the halving did not affect the number of transactions that can be processed per block, it did reduce the amount of new Bitcoin that miners are awarded by half.

Stocks of crypto mining companies slumped more than the price of Bitcoin. Marathon Digital Holdings dropped 11 per cent, Riot Platforms fell 8.8 per cent, Cleanspark slipped 9.6 per cent and Cipher Mining dipped 7.9 per cent.

Additionally, MicroStrategy tumbled 18 per cent. The software maker, which has made buying Bitcoin as part of its corporate strategy, on Monday posted a first-quarter loss of US$53 million. The firm took an impairment charge against the value of its Bitcoin holdings even though the cryptocurrency surged during the period.

Market watchers were looking at Asia for a fresh tailwind and had all eyes on the Bitcoin and Ether spot ETF listings in Hong Kong, but the Tuesday debut failed to inspire investor confidence.

The six new ETFs saw a combined US$11 million of trading volume in the first session, data compiled by Bloomberg show. That is a far cry from the US$4.6 billion in total volume the 10 US spot-Bitcoin products recorded in their debut. “The market built some irrational expectations ahead of the launch of the Hong Kong ETFs,” said K33 Research analyst Vetle Lunde.

Ether, the second largest token, also saw its largest monthly decline since June 2022.

The SEC demanded information from various companies in March as part of its review of Ether. Last week, crypto software company Consensys filed a lawsuit to contest the SEC’s power to regulate the Ethereum blockchain and Ether, marking the latest of legal fights between the crypto industry and the agency.

Other smaller, more volatile tokens such as Dogecoin and Polkadot fell even more on Tuesday. Such so-called altcoins tend to outperform Bitcoin during rallies and fall more in downturns. BLOOMBERG