Bitcoin faces significant downturn plunging to a seven-week low and hovering below the $40,000 mark

On Monday, Bitcoin, the leading cryptocurrency globally, experienced a significant downturn, reaching a seven-week low and dipping below the $40,000 threshold, as reported by Reuters. This decline represents the lowest point since the launch of 11 spot bitcoin exchange-traded funds (ETFs) on January 11. In the latest update, Bitcoin saw a 3.98 percent decrease, reaching $39,938.00, indicating a bearish trend following a brief recovery.

Ether, the second-largest cryptocurrency, also faced a decline of 6.37 percent, falling to $2,328.30.

Bitcoin’s recent rally, fueled by optimism surrounding potential approval for bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC), encountered a setback as it entered a period of decline. The cryptocurrency had surged approximately 70 percent since August, prompted by a federal court compelling the SEC to re-evaluate its decision to reject Grayscale Investment’s bitcoin ETF application.

Analysts had anticipated a retracement of some gains, emphasizing the inherent volatility of the cryptocurrency market. Market observers pointed to Bitcoin struggling to compete with traditional stocks, especially as the S&P 500 benchmark index achieved new record highs. The smoother ascent of traditional financial benchmarks seemed to overshadow Bitcoin’s performance.

Antoni Trenchev, co-founder of crypto lender Nexo, used a metaphor to describe the situation, stating, “It feels like bitcoin investors are running up a descending escalator right now as traditional financial benchmarks enjoy the easier ride to record highs.”

Trenchev noted that historical trends indicate similar slumps in Bitcoin’s value following major crypto events, such as the initial public offering of Coinbase and the launch of bitcoin futures.

Additionally, Bitcoin faced pressure from outflows from Grayscale Investment’s bitcoin trust, which converted into an ETF after the SEC approved other bitcoin ETF products earlier this month. FTX, which faced bankruptcy in 2022, reportedly sold 22 million shares worth close to $1 billion in the ETF, further contributing to Bitcoin’s challenges. Trenchev expressed concerns, suggesting that spot bitcoin ETFs are at risk of joining the “crypto hall of infamy.”