Bitcoin Faces Worst Month Since FTX Crash With ETF Demand Cooling

(Bloomberg) — Bitcoin is logging its worst month since the collapse of Sam Bankman-Fried’s FTX empire, and enthusiasm among U.S. exchange-traded funds for the largest digital asset is waning.

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The original cryptocurrency fell 14% in April; This marked its biggest decline since its 16% drop in November 2022. The US-ETF-fuelled frenzy sent Bitcoin to a record high of almost $74,000 in March, but falling demand for risky investments has also taken a hit. Inflows into the products have decreased significantly due to Fed interest rate cut hopes.

As of April 29, this month saw net outflows of $182 million from 11 U.S. spot ETFs. The funds saw a net inflow of $4.6 billion in March. The U.S. Securities and Exchange Commission approved the funds in January.

The highly anticipated Bitcoin halving, which occurs every four years and reduces the supply of new coins on the market and has historically created a headwind in price, has had minimal impact since it occurred on April 19.

Market watchers were looking to Asia for a fresh wind and had all eyes on Bitcoin and Ether spot ETF listings in Hong Kong, but Tuesday’s open failed to inspire investors’ confidence. Data compiled by Bloomberg show that the six new ETFs reached a total trading volume of $11 million in the first session. This is a far cry from the total volume of $4.6 billion recorded by the 10 US spot Bitcoin products at their debut.

“The market has created some unreasonable expectations ahead of the launch of Hong Kong ETFs,” said Vetle Lunde, an analyst at K33 Research.

In response to weak demand from Hong Kong, the price decline of Bitcoin and Ether accelerated, with the two largest cryptocurrencies falling as much as 3.4% and 6.6% respectively on Tuesday. As of 9:10 a.m. in New York, Bitcoin was trading at $61,090 while Ether was trading at $3,000.

Ether, the second-largest token, fell nearly 17% in April, marking its biggest monthly decline since June 2022.

The SEC requested information from various companies in March as part of its Ether review. Last week, crypto software company Consensys filed a lawsuit to challenge the SEC’s authority to regulate the Ethereum blockchain and Ether; This marked the latest legal fights between the crypto industry and the institution.

Lunde added that the decline in demand points to further volatility in the future. “Hong Kong ETFs will never be enough to change this trend; at best, inflow forecasts range from 15,000-30,000 Bitcoins for next year, the equivalent of two days of inflows into BlackRock’s Bitcoin spot ETF in February,” he said.

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