ETFs
Why the iShares Bitcoin Trust ETF Lost 11.4% Last Month
The Federal Reserve’s cautious interest rate policies have put pressure on the price of Bitcoin in recent months.
Actions of the iShares Bitcoin Trust Fund (I BITE -0.12%) Exchange traded funds (ETFs) fell 11.4% in June, according to data from S&P Global Market Intelligence. This decline reflects the underlying trend Bitcoin (Bitcoin 0.54%), with the leading cryptocurrency falling 11% over the month.
The Main Reasons for Bitcoin Price Drop in June
As expected, the biggest and most popular Bitcoin ETF at spot price has tracked Bitcoin price movements almost precisely. There are always small discrepancies between Bitcoin ETFs and Bitcoin prices when looking at a multi-day period, because the price of an ETF only moves during standard stock market trading hours, while cryptocurrency prices never stop moving. But when the market is open, the two assets will be almost completely in sync, and their divergences will flatten out in the long run.
So why did Bitcoin have a bad month in June? Several factors contributed to this situation:
- Bitcoin investors are keeping a close eye on the U.S. economy. Digital assets are still a new and somewhat unknown presence on Wall Street, and even the largest cryptocurrency is more often viewed as a risky investment than a hedge against inflation, like gold. As a result, the Federal Reserve’s cautious approach to interest rate normalization has kept a tight rein on the Bitcoin price chart in 2024.
- The young cryptocurrency market is already haunted by some old ghosts. Mount Gox Cryptocurrency exchange Mt. Gox went bankrupt in 2014 after a hack wiped 850,000 bitcoins from its vaults and user accounts. The attack stole assets worth $460 million at the time, but $48.6 billion at current bitcoin prices. Now, a decade later, Mt. Gox trustees are starting to repay the lost cryptocurrency, preparing to transfer 4.3% of the crypto’s total value into new accounts. On June 24, news of this repayment plan led to the biggest drop in Bitcoin price this month.
- The Twin Growth Catalysts of Spot Priced Bitcoin ETFs and the Fourth Bitcoin Mining Rewards Halving Bitcoin inspired many crypto traders earlier this year. But Bitcoin has yet to reach a peak, and many newcomers to the asset have lost some of their initial enthusiasm. This makes the asset more volatile, especially in a downward direction.
What to Expect from Bitcoin and its ETFs
Bitcoin halving events have historically been followed by price increases, as they reduce the rate of new coin creation. This suggests that another surge could be coming soon.
Institutional investors are increasingly interested in Bitcoin, and the introduction of ETFs has made it easier for them to invest in it. This is another positive catalyst that should ultimately increase demand for Bitcoin on the open market and drive its price higher.
Additionally, the total supply of bitcoins that can be in circulation is limited to 21 million coins, and over 19 million of them have already been mined. This makes it a scarce asset like physical gold, and this scarcity combined with increasing demand could also lead to price increases in the long term.
The same catalysts also apply to iShares Bitcoin Trust FundSpot Bitcoin ETFs provide a convenient and secure way to invest in Bitcoin through traditional brokerage accounts, eliminating the need for these investors to manage digital wallets or open additional accounts on crypto-focused exchanges.
This drop in prices could have created a good opportunity for invest directly in Bitcoin or buy it through the iShares Bitcoin Trust, but keep in mind that the cryptocurrency market can be volatile. Patience is a virtue in the stock market, and even more so when investing in cryptocurrencies.