Bitcoin Posts Worst Month Since FTX Collapse Amid Ebbing ETF Euphoria

Bitcoin has experienced its most challenging month since the collapse of Sam Bankman-Fried’s FTX empire, as the excitement surrounding US spot Bitcoin ETFs continues to wane. 

The cryptocurrency’s value plummeted by nearly 16% in April, only slightly better than the decline witnessed in November 2022, according to data accumulated by Bloomberg. 

The surge in demand fueled by the anticipation of ETFs propelled bitcoin to an all-time high of almost $74,000 in March. 

However, as optimism for Federal Reserve interest-rate cuts waned and risky investments lost their allure, inflows to these products significantly decreased.

Spot Bitcoin ETFs See $182 Million in Outflows in April

A sharp drop of approximately 5% on Tuesday pushed bitcoin to around $60,000 and had a ripple effect on the rest of the crypto market. 

Smaller cryptocurrencies such as Ether, Solana, and meme coins experienced more substantial losses, while shares of crypto companies also closed lower.

Throughout April, a net outflow of $182 million was observed from the 11 US spot ETFs, a stark contrast to the net inflow of $4.6 billion recorded in March. 

The approval of these funds by the US Securities and Exchange Commission (SEC) in January had created a new avenue for engagement, surpassing everyone’s expectations. 

The highly anticipated Bitcoin halving, a four-year event that reduces the supply of new coins and historically acts as a price catalyst, had minimal impact this time around when it occurred on April 19. 

While the halving did not directly affect transaction processing, it did cut the amount of new Bitcoin awarded to miners in half.

Crypto Stocks Suffer More

The stocks of crypto mining companies suffered more significant declines than bitcoin itself. 

Companies like Marathon Digital Holdings Inc., Riot Platforms Inc., Cleanspark Inc., and Cipher Mining Inc. experienced drops ranging from 7.9% to 11%. 

MicroStrategy Inc., known for its corporate Bitcoin strategy, also faced an 18% tumble after reporting a first-quarter loss of $53 million due to an impairment charge against the value of its bitcoin holdings.

Market observers had hoped for a fresh boost from Asia, focusing on the listing of bitcoin and ether spot ETFs in Hong Kong. 

However, the debut on Tuesday failed to inspire confidence, with the six new ETFs collectively generating only $11 million in trading volume during the first session. 

This pales in comparison to the $4.6 billion total volume achieved by the ten US spot Bitcoin products during their debut.

Ether, the second-largest cryptocurrency, suffered an 18% decline in April, marking its largest monthly drop since June 2022. 

The SEC’s request for information from various companies in March as part of its review of Ether, along with a recent lawsuit by crypto software company Consensys contesting the SEC’s regulatory authority over Ethereum and Ether, have further added to the legal battles between the crypto industry and the regulatory agency.

Other smaller and more volatile tokens like Dogecoin and Polkadot experienced even steeper declines on Tuesday. 

These alternative coins, known as altcoins, tend to outperform bitcoin during rallies but fall more sharply during market downturns.