A popular process in financial markets, which attempts to predict the right timing for buying and selling assets, is called "Buy on the rumor and sell on the news." This process involves buying the asset based on rumors surrounding a specific key event, but when the event actually occurs, the wise decision is to sell.
This phenomenon seems to have affected the price of Bitcoin in recent months as news accumulated regarding the ETFs approaching their scheduled date with high chances of approval.
Many statements, preparations, and interviews by industry leaders added more certainty over time, leading to a significant increase in prices within a short period. However, at the moment of approval, the price reached its peak, and just a day later, it started to decline, even changing its short-term trend.
Why has Bitcoin dropped in value?
As of now, almost two weeks have passed since the ETF launch, and Bitcoin is trading at less than $40,000, which is considerably lower than the peak price of $49,000 at the time of the announcement.
The significant price drop can be attributed to investors closing their positions in the Grayscale Bitcoin Trust (GBTC) due to significantly higher fees compared to competitors. Additionally, speculators and savvy players are taking profits after the meteoric rise since the beginning of 2023.
In terms of the leading ETFs that absorbed the largest amount of demand, the BlackRock (IBIT) fund and the Fidelity (FBTC) fund have been the frontrunners. However, it is worth noting that the Grayscale fund still holds the largest amount of coins by a significant margin. Only time will tell the long-term effects of these ETFs, as such price movements in the crypto market are common and routine.