What happened to the bitcoin rally everyone was expecting?
Well, maybe not everyone, but there was exuberance around the recent launch of bitcoin’s first exchange-traded funds. Standard Chartered predicted bitcoin could hit $200,000 (€184,000) by 2025. Fundstrat’s Tom Lee said bitcoin could reach $150,000 in 12 months and $500,000 within five years.
Retail investors may have easier access to bitcoin, but the anticipated ramp-up in prices hasn’t happened. Instead, bitcoin sank to an eight-week low, dipping below $39,000 after a 17 per cent decline.
It’s a classic case of “buy the rumour, sell the news”, with speculators booking profits following bitcoin’s fierce run-up to the much-anticipated ETF launch. That aside, the anticipated rush of funds into bitcoin didn’t happen.
Yes, nearly $5 billion made its way into various bitcoin ETFs in recent weeks, but the Grayscale Bitcoin Trust saw $4 billion in outflows over the same period. Most inflows were simply investors selling out of the expensive Grayscale trust and into cheaper ETFs.
Obviously, it’s too early to say bitcoin bulls were wrong. Prices may well advance again in coming months, but underwhelming fund flows suggest gains will fall short of the most optimistic expectations.
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