After fighting to hold $20,000 on Wednesday, buyer support for bitcoin (BTC-USD) collapsed early Thursday morning, bitcoin falling over 5% to trade as low as $18,930.
This latest decline has seen bitcoin lose more than 37% in June — its worst monthly loss since since December 2018.
Thursday’s drop comes after the SEC sent rejection letters for ETFs proposed by both Grayscale and Bitwise, as well as continued inflation fears impacting sentiment in the broader crypto market.
Like bitcoin, sell-offs continued for other cryptocurrencies Thursday morning, though some are holding out better than bitcoin. Binance’s BNB token (BNB-USD) down 4%, Solana (SOL-USD), down more than 6%, Cardano’s ADA token (ADA-USD), down more than 4%, Chainlink (LINK-USD), down 3%, have all seen losses on the day.
Grayscale ETF rejection and lawsuit
The SEC’s rejection of Grayscale’s proposed ETF was a key factor dragging down crypto markets early Thursday. And despite proving to be a safer bet for crypto investors, bitcoin investment products have a long way to go, as Arca’s chief investment officer Jeff Dorman and and others have pointed out.
One of the worst offenders, according to Dorman, is Grayscale’s Bitcoin Trust (GBTC).
Currently changing hands at $13.62 per share, GBTC trades over-the-counter, meaning that the bitcoin investment vehicle cannot accurately create and redeem shares on pace to meet the flows of bitcoin’s underlying price. Based on data from Coinglass, the GBTC discount stands at 28%, meaning the value of the trust’s bitcoin holdings are almost $5 per share higher than its market price.
As Yahoo Finance previously reported, Grayscale has argued approval from the SEC to convert GBTC into an exchange traded fund (ETF) that holds bitcoin and relies on “authorized participants” to continuously redeem and create shares could close this discount.
On Monday, Grayscale attempted to show regulators an ETF would be operationally viable, announcing Wall Street firms Jane Street and Virtu Finance had agreed to fill the authorized participant role as long as Grayscale received approval from the SEC.
As the SEC showed in its filing on Wednesday, the regulator continues to harbor concerns that “the price of bitcoin is subject to manipulation on unregulated platforms” and the approval could invite additional manipulation.
Additional pressure in the crypto markets Thursday can be traced back to the collapse of the Terra ecosystem in early May and the resulting contagion from over-leveraged firms turned forced sellers.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.