Crypto fans got what they wanted. So why is bitcoin falling?

By CNN Newsource

Published January 25, 2024 4:46 AM

Analysis by Krystal Hur, CNN

New York (CNN) — A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

Major cryptocurrencies were on a tear at the end of last year, driven higher by anticipation that US regulators would approve bitcoin exchange-traded funds, broadening the pool of potential investors.

Once those funds received the go-ahead, bitcoin fell. What gives?

Bitcoin topped $47,000 early this month for the first time since April 2022, as investors anticipated that the US Securities and Exchange Commission would approve the first ever exchange-traded funds tracking the spot price of bitcoin.

But the cryptocurrency declined after the favorable SEC decision duly came on January 10. And bitcoin edged below $40,000 earlier this week for the first time since December.

The price of the cryptocurrency was trading at roughly $39,519 a coin as of 4 pm ET on Wednesday.

So, why is the price of bitcoin falling, even after investors got what they wanted? Part of the reason is likely a “buy the rumor, sell the news” mentality, according to Antoni Trenchev, co-founder of crypto lender Nexo. That’s the idea that the price of an asset often rises in anticipation of an announcement and then falls as investors take profits once the news actually comes out.

Interestingly, bitcoin ETF activity actually shows net buying.

Investors have pulled about $4.4 billion from the Grayscale Bitcoin Trust since it was converted to an ETF on January 11, according to Coinshares data through Wednesday. Greyscale’s fund is the largest bitcoin ETF, holding roughly $20 billion in assets.

But those flows have been offset by about $5.3 billion poured into nine other spot bitcoin ETFs.

ETFs hold just a small portion of the bitcoin that’s traded, says Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. That means “the call is coming from inside the house. Someone who pre-owned the crypto is doing the selling,” he said.

Bitcoin has made its way higher over the last year since plummeting to below $17,000 in late 2022, after cryptocurrency exchange FTX filed for bankruptcy and set off a firestorm in crypto trading. Still, it remains well below its record high of roughly $69,000 reached in November 2021.

“We’re used to this kind of volatility in the space. What matters now is what’s coming next that could generate excitement around cryptos and deliver further gains,” wrote Craig Erlam, senior market analyst at OANDA, in a note on Tuesday.

Your 401(k), gas prices and homes: 3 surprising reasons to be happy

Americans have been fed up with an economy that many feel isn’t working for them, and the 2024 election may turn out to be a referendum on that gloomy sentiment. But the winds may be changing a bit: 401(k) plans are on fire. Consumer sentiment is surging. Gas prices have fallen. The country’s economic vibes are finally vibing again, according to an analysis by my colleague Bryan Mena.

The years-long economic funk was largely driven by the unforgiving pain of high inflation. A tough housing market and exorbitant child care costs continue to bedevil budgets, but the inflation pendulum is finally swinging in the other direction.

Inflation is down substantially from its four-decade peak in the summer of 2022. A powerful US stock rally is now back on track, mortgage rates have eased a bit in recent weeks and the job market remains in great shape, with unemployment near historic lows.

None of this guarantees the good times will continue, of course. Conflicts abroad could push up prices for oil and other consumer goods, for example.

But consumer surveys have begun to capture a shifting, more upbeat sentiment among Americans. Here are three reasons to be happy about the current state of the US economy. (At least for now.)

It’s still too hard to be a working parent in America, Janet Yellen says

In a major speech set to be delivered Thursday in Chicago, Treasury Secretary Janet Yellen plans to detail her vision for helping middle-class families overcome affordability challenges, according to excerpts shared first with CNN.

“Our economic agenda is far from finished. There’s much more the President and I would like to do to support the middle class,” Yellen plans to say during the speech at the Economic Club of Chicago.

Treasury officials have billed the speech as one of the most significant Yellen plans to deliver this year and an effort to set the tone for her domestic agenda during 2024, reports my colleague Matt Egan.

Yellen plans to balance the Biden administration taking credit for the economic recovery from Covid-19 with acknowledging that many Americans are frustrated with how expensive it is to buy a house, raise children and save money for college.

“It is still too hard to be a working parent. We need to get American families access to affordable child care and other support for their children,” Yellen is set to say, according to the excerpts.