CRYPTOCURRENCY
Why is Bitcoin falling after the SEC approved exchange-traded funds?
Changes to the way Bitcoin can be invested in are expected to shake up the cryptocurrency market once again though it has led to a fall in price.
The price of Bitcoin was expected to leap up on the announcement that the Securities and Exchange Commision (SEC) was relaxing its rules on the use of cryptocurrencies in Exchange-Traded Funds. However, after reaching its highest value since April 2022 of $47,000 on the eve of the the announcement on 11 January, the price of Bitcoin unexpectedly fell.
What is an Exchange-Traded Fund?
An Exchange-Traded Fund (ETF) is a type of investment fund and exchange-traded product, which is traded on stock exchanges much like individual stocks. ETFs are designed to track the performance of a specific index, commodity, bonds, or a basket of assets.
Investors can now invest in Bitcoin without high fees of crypto exchanges.
The cryptocurrency coin is currently valued at $42,057, up from lows of under $40,000 a week after the SEC’s announcement.
So why is it falling in value?
Analysts have been positing their thoughts on why this has happened. Antoni Trenchev, co-founder of crypto lender Nexo, said it could be because of a “buy the rumor, sell the news” mentality. What this means is that the build-up to an announcement and the hype it generates over-inflates the value of an asset, in this case Bitcoin.
To put this into context, the decrease in price means it is still higher than it was at any point from January to December 2023. The small drop may have harmed some recent investors but the value of Bitcoin is still at a high level relative to the past. There is still some way to go before hitting the peak of nearly $65,000 in November 2021.