Bitcoin’s 20% Post-ETF Slide Threatens Exchange-Traded FOMO

It can seem silly to apply some traditional market terminology to crypto, such as when a “bear market” is declared because an asset or index has fallen 20% from a recent peak. Historically, a move like that is enough to mark a big regime shift in the stock market, but just another day in the office for the volatile world of crypto trading.

Yet the latest 20% drop in Bitcoin from its recent high is worth some scrutiny. In fact, it could be the most-scrutinized dip of that size in recent memory, given how much hype accompanied the run-up to the launch of exchange-traded funds that invest direct in the original cryptocurrency.

There are an assortment of reasons being offered for the drop, including the old standby cliché of “buy the rumor, sell the news” when it comes to ETFs, and some of the usual macro suspects: Interest rates have crept higher in the new year, so has the dollar. Even the ghost of FTX is in the mix! The bankrupt exchange’s estate has been dumping its position in the newly converted Grayscale Bitcoin Trust ETF, and those outflows are destined to be used to pay off creditors rather than recycled into competing Bitcoin ETFs with lower fees.

Regardless of what catalysts caused the 20% drop, the key question now is whether the tumble itself will prove to be its own catalyst to frost over the green candles that seemed to have been marking the end of the latest crypto winter. Let’s face it, FOMO – fear of missing out – has always been one of the most important drivers in crypto moonshots.

A recent survey by Deutsche Bank showed that more than one-third of respondents expect Bitcoin to drop below $20,000 by year end, and most consumers expressed concern about the potential collapse of a major cryptocurrency by 2026.

In other words, missing out is not exactly the main fear these days in the post-FTX crypto landscape, regardless of how much cheaper, safer and more-convenient the ETFs make it to gain exposure to Bitcoin.

So for the moment, all the breathless predictions that the launch of the ETFs would send Bitcoin to a new record high – or even to $100,000, as some forecast – seem a little suspect.

But after all, tomorrow is another day and the Bitcoin hype machine is poised to pivot to a new talking point: The upcoming halving, when supply of new tokens gets cut in half. How much that’s able to get the FOMO juices flowing again could be the ultimate near-term test of the potential demand for the new ETFs.