The price of Bitcoin has been on a rollercoaster ride over the last few weeks, since its plummet from $49,000 after the launch of the 11 spot ETFs on 11 January.
So far, Bitcoin has plunged from only a few inches from $50,000 to as low as $41,000 where it is currently changing hands.
Bitcoin is clearly in some of its uncertain times in January, and we all want to know:
Why has Bitcoin been acting the way it has? What factors are behind its strong volatility one moment, and then radio silence in the next? What can we expect from Bitcoin, going forward?
Bitcoin traded at around $42,800 on Thursday this week, in what appeared to be a fight for another rally.
However, Bitcoin surprised the world on Friday, when it declined by more than 4% to as low as $41,000.
It turns out there might be a possible explanation for this price dip.
James V. Straten, a research and data analyst at CryptoSlate was the first to draw attention to a crypto whale who bought a whopping 100,000 Bitcoin (worth $4.8 billion) back in 2021 when the market was starting to heat up, and Bitcoin traded at around $48,000.
The whale likely expected the price of Bitcoin to continue going up, which it did.
Bitcoin travelled further up, past $60,000 and past $65,000.
However, things turned upside down from here, when the crypto market started to decline heavily, and Bitcoin ultimately crashed to $15,500 in December 2022. This resulted in an unrealized loss of 75% for this whale.
Straten notes that this whale may have had to endure Bitcoin's rally throughout 2023, and as soon as Bitcoin's price hit its break-even point at $49,000, the whale dumped it all and made a $100 million profit in the process.
"This is why (in my opinion) on Jan. 12, Bitcoin had its largest 1-day drawdown since the FTX collapse and tanked after the ETF started trading," Straten says
The whale's sell-off triggered a chain reaction that sent Bitcoin crashing, along with the rest of the market in a matter of hours.
This whale selling a whopping $5 billion worth of Bitcoin against the market, and shaving off 100 million dollars is enough of a reason why the market is down today.
But what are some other factors?
It turns out that the effects of the spot Bitcoin ETFs aren't as straightforward as everyone thinks.
For example, Bitcoin declined heavily from $49,000, only a few days after these ETFs were approved.
It is important to keep in mind that these ETFs have done wonders for Bitcoin under the hood.
For example, CC15Capital in a recent tweet, notes that a whopping 30,496 Bitcoin has been bought since the ETF Launch.
This means that from 12 January until 19 January, nearly 4,000 Bitcoin has been scooped up every day.
CC15Capital also notes that 9 of these 11 issuers have added a total of around 68,500 BTC to their holdings since their launch, which is worth $2.8 billion at the current price.
Moreover, CC15Capital notes that on Jan. 17 alone, they bought a net 10,667 BTC, worth $440 million.
This becomes impressive when we mention that only about 900 Bitcoin is mined each day.
The most active issuer is known to be BlackRock, which bought about 8,700 out of the 10,667 BTC on Jan. 17, worth around $358 million.
This all seems great for Bitcoin because there is a great deal of demand to inflate its price massively each day.
It turns out that the problem—is Grayscale.
On 17 January, Bloomberg ETF analyst, James Seyffart, noted that Grayscale has been losing Bitcoin out of its reserves, in bucketfuls.
The Grayscale Bitcoin Trust (GBTC), which was converted from a trust to an ETF on Jan. 11, has now experienced outflows of about 38,000 BTC, worth more than $1.2 billion.
This cancels out the efforts of the rest, leaving Bitcoin either stagnant or poised for heavy decline.
As bad as Bitcoin's price action is at the moment, things could be much worse.
Bitcoin, according to data from TradingView, has managed to stay above the $40,000 zone, which is also a psychological support.
This leaves a lot of room for a possible reversal and a recovery to the upside from here.
The crucial spot to watch at this point would be the $40,450 zone because a break below might bring Bitcoin into a retest of the $38,000 support.
However, if we do see a recovery, Bitcoin will likely make another attempt at retesting or breaking through $50,000.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.