The Bitcoin and Ethereum prices are facing another steep decline, with the crypto market notably absent from the typical ‘Santa rally’ seen in other major asset classes. This downturn appears largely driven by substantial selling pressure from cryptocurrency exchange-traded funds (ETFs), which have been experiencing significant outflows.
Understanding the Price Drop
Both Bitcoin (BTC) and Ethereum (ETH) prices have dropped amidst ongoing selling activities from various BTC and ETH ETFs. Recent data from Arkham indicates that BlackRock, the world’s largest asset manager, deposited 2,292 BTC—valued at approximately $200 million—and 9,976 ETH, worth about $29 million, into Coinbase yesterday, likely as part of a strategy to offload these cryptocurrencies. This marked the second instance this week where BlackRock moved such substantial amounts of BTC and ETH to Coinbase.
Arkham further revealed that on December 22, BlackRock deposited even larger amounts—2,838.78 BTC ($255 million) and 29,928 ETH ($91.29 million) into Coinbase, amplifying worries over a lack of institutional support. In total, BTC ETFs have recorded a net outflow of $330 million in just this week, while ETH ETFs have faced a net outflow of $11 million.
This data signals a troubling trend, as institutional interest in Bitcoin and Ethereum appears to be dwindling, raising concerns about the long-term viability of these assets in the current market environment. A CoinShares report earlier this week illustrated that over the past week, Bitcoin ETFs saw an outflow of $460 million, while Ethereum ETPs noted outflows totaling $555 million.
On a broader macroeconomic scale, the price declines can also be attributed to the Federal Reserve’s projected stance on interest rates. With the latest reports showing stronger-than-expected U.S. GDP data and jobless claims, expectations have risen that the Fed may choose to maintain current interest rates during the upcoming January FOMC meeting.
Rising Bear Market Threat
Recent analysis from CryptoQuant suggests that the risk of entering a bear market is becoming increasingly plausible, as indicated by the Bitcoin Combined Market Index (BCMI). The BCMI is currently below the equilibrium level but remains above historically low zones, implying potential for further declines in BTC price.
This data-driven perspective indicates that Bitcoin may be transitioning into a prolonged bearish phase rather than merely experiencing a short-term pullback. If historical patterns hold, Bitcoin could establish a more resilient bottom should the BCMI revisit levels noted between 2019 and 2023, highlighting the need for cautious optimism as market sentiment shifts.
At the time of reporting, Bitcoin’s price has now settled around $87,700, reflecting a notable decline of nearly 2% over the past 24 hours, according to data from CoinMarketCap.
