The volatility caused by the launch of spot Bitcoin ETFs in the U.S. has wiped over $115 billion off Bitcoin’s market cap. There has been a significant increase in realized losses in the week following the ETF launch, with short-term holders bearing the brunt of these losses.
Significant outflows from Grayscale’s GBTC have led to a sharp increase in over-the-counter (OTC) Bitcoin transfers, as redeeming GBTC for U.S. dollars requires GBTC to sell the underlying BTC OTC.
Short-term holders, sensitive to short-term volatility, had an aggressive reaction and began transferring their holdings to exchanges at a rapid pace. While a certain portion of short-term holders transferring to exchanges realized profits (i.e., sold their holdings at a price higher than when they bought them), most sold at a loss.
The pace of GBTC redemptions and short-term holder exodus to exchanges certainly affected Bitcoin’s price. BTC began losing its footing at $46,300 on Jan. 11, the first day of ETF trad
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