Rising energy costs are forcing Bitcoin miners to sell service loans and the SEC has rejected a Bitcoin spot ETF.
- In the past 24 hours, Bitcoin has fallen to $18,729 according to CoinMarketCap.
- While several factors are contributing to the downward pressure on Bitcoin, one factor was that the United States Securities and Exchange Commission rejected an application by Grayscale to launch an exchange-traded fund (ETF) a year ago. two days.
- Another key pressure on the price of BTC is Bitcoin miners dumping the coin on crypto exchanges, which adds to the supply, driving the price down. Proceeds from these sales are needed to cover skyrocketing energy and equipment borrowing costs.
The crypto crash has hit Bitcoin (BTC) particularly hard, sending it its worst performance in the first half of every year since its inception in 2009 – suffering a 59% loss so far in 2022. Over the past 24 years , by one hour, the first and most valuable crypto dropped to $18,729 according to CoinMarketCap, falling well below the psychological price of $20,000. Bitcoin has only done this once so far this year. While there are certainly several macro reasons for the decline in Bitcoin price, there are two main downside factors that cannot be ignored.
Recent SEC Rejection of Another Bitcoin Cash ETF Application
Two days ago, the SEC officially announced that it was not going to approve an application filed by crypto investment firm Grayscale for an exchange-traded fund (ETF) in the United States. Currently, several Bitcoin futures-based ETFs are available to US investors – but not a spot ETF.
A spot Bitcoin ETF would give investors direct access to buy the crypto on the “spot” market at a real-time price. The futures-based ETF allows investing indirectly in Bitcoin by using contracts to buy or sell BTC at a pre-defined future date. A futures-based ETF and a spot ETF offer the investment diversity benefits of a mutual fund with the trading flexibility of a stock.
Despite the slowdown, a recent survey found that 72% of financial advisors are chomping at the bit for a Bitcoin cash ETF and would likely invest client assets in this type of financial instrument if it were available.
Bitcoin Miners Sell BTC Assets to Cover Rising Expenses
The other key downside factor affecting the price of BTC is that Bitcoin miners continue to actively sell tens of millions of dollars worth of the asset on cryptocurrency exchanges. By flooding the crypto market with new BTC units, they increase the supply and thus decrease the price per coin.
The reason for this selling pressure is that miners around the world need the proceeds from these Bitcoin sales to cover soaring energy prices to run their power-hungry computing and cooling equipment. Funds from BTC asset sales are also needed by US-based Bitcoin miners to pay higher-interest loans and debt service resulting from the Fed’s aggressive plans to keep raising interest rates. short-term interest several times this year.
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No one knows for sure where the price of Bitcoin will be over the next six months or next year, but one thing is absolutely certain and that is that we will see some volatile price action along the way.
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