Bitcoin has hit a real bump in the road, and for many analysts and traders, this appears to be knocking their confidence to new lows.
Bitcoin Isn’t Being Managed as Much By Third Parties
The world’s number one digital currency reached a whopping $42,000 on January 8. This is the highest the currency has been in its 12-year history. However, at the time of writing, the asset is down to just over $32,000, meaning that each unit of bitcoin has dropped by roughly $10,000 in less than a month.
To an extent, traders should know that bitcoin is an extremely volatile asset. The currency goes up and down more often than the sun sets and rises, but this latest dip seems to have many investors rethinking their strategies and ultimately putting less money into crypto management funds.
This is evident in the drops witnessed in the amount of assets overseen by companies such as Coin Shares and Grayscale. During the early January 2021 hype, Grayscale saw as much as $28.2 billion in crypto assets placed in its managing hands. By contrast, last week saw only $24 billion, a slip of about $4 billion within a rather short period.
Coin Shares has also witnessed something of a dive. The company saw roughly $3.4 billion crypto assets deposited in its many customer accounts during the first portion of January. However, last week saw only $2.9 billion invested. Overall, the amount of crypto funds invested last week fell by about $5 billion from January 8, which saw more than $34 billion invested. Last week, that number fell to just over $29 billion.
The fact is that whenever bitcoin takes a dip, investors tend to become more cautious, though this time, that caution has become even stronger given how much bitcoin has risen in recent months. James Butterfill – an investment strategist at Coin Shares – hinted in a recent interview that there are many economic factors that may be contributing to the sudden lack of confidence in the crypto space.
In addition, traders may be fearing another bubble, of which signs undoubtedly exist. He states:
We believe investors have been very price conscious this year due to the speed at which prices in bitcoin achieved new highs. The recent price weakness, prompted by recent comments from Secretary of the U.S. Treasury Janet Yellen and the unfounded concerns of a double spend now look to have been a buying opportunity with inflows breaking all-time weekly inflows.
People Continue to Buy
The situation is a bit of a two-sided coin (pardon the pun) given that the sudden – and massive – price slip for bitcoin has suddenly sparked a new buying frenzy amongst traders, who have purchased a record amount of new BTC this week (approximately $1.31 billion at press time), though they are largely managing these assets themselves.
In second place was Ethereum, which posted purchases amounting to roughly $34 million.
