The approval of a bitcoin (btc -8.11%) The ETF was supposed to bring billions of dollars to the cryptocurrency industry, but as usual, investors bought the rumor and sold the news. As of 2:30 pm ET, Bitcoin is down 6.3% in the last 24 hours and sales accelerated early this morning.
Ethereum (ETH -3.15%) has recovered in recent days, but fell 3.7% between 10 a.m. ET and 2:30 p.m. ET. Dogecoin (DOGE -5.77%) It also plummeted 3.9% in the last few hours.
Buy the rumor, sell the news.
The approval of the Bitcoin ETF was months in the making, and when these ETFs were announced on Wednesday, January 10, the market began to sell off. Many traders had bought in anticipation of ETFs (buying the rumor) and then started selling when there was no longer a catalyst to count on in the future (selling the news).
To be fair, Bitcoin has been stable this past week, Ethereum is up 10% and Dogecoin is down just 0.4%. So there hasn't been a big movement if you go back a little bit.
I think it's notable that Ethereum has gained so much. Speculation trading has likely moved to the second largest cryptocurrencywhich could eventually become a popular ETF asset as well.
Technology takes it seriously
Cryptocurrencies are not traded in a vacuum either. For the past three years, cryptocurrencies have been trading high-growth tech stocks and are having a terrible day.
Layoffs in cloud flare, AlphabetDiscord and dozens of other companies are questioning the growth we should expect by 2024. There is still a delay in understanding in parts of the tech industry that growth is slowing and that costs must be controlled if companies want to be profitable.
This doesn't necessarily affect cryptocurrencies directly, but if cryptocurrencies are trading growth tech stocks, it's not surprising to see a sell-off.
What we don't know is the most important thing
The theory in recent months in the cryptocurrency space was that the approval of an ETF would attract new buyers to the cryptocurrency market, bringing with it billions of dollars. But will that be the case?
I find that buying cryptocurrencies is quite easy for anyone who has wanted to buy them in the last few years. An ETF may make it easier in some ways, but it also comes with fees that are unnecessary for cryptocurrencies that you can hold in your own custody.
I wouldn't be surprised if cryptocurrencies continue to fall as the market realizes that new money is not coming in as expected following ETF approvals. And there is no greater utilization of blockchain for innovative purposes if the assets are held in an ETF.
This week has been more volatile than even a normal week in crypto. Don't be surprised if that's the theme for the next few weeks, as the market figures out who is buying cryptocurrencies to hold them and who was simply speculating on ETF approvals. There may be more speculation than investors would like to think.
Alphabet executive Suzanne Frey is a member of The Motley Fool's board of directors. Travis Hoium He has positions in Alphabet, Cloudflare and Ethereum. The Motley Fool positions and recommends Alphabet, Bitcoin, Cloudflare, and Ethereum. The Motley Fool has a disclosure policy.
