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Bitcoin erased its gains from the last two months to trade below $39,000 on Tuesday, reinforcing concerns that the Securities and Exchange Commission's approval of spot bitcoin ETFs was an excuse to sell after a months-long rally driven by anticipation of the event.
The world's biggest cryptocurrency has tumbled almost 5% in the last 24 hours, less than two weeks after trading began for the nearly dozen bitcoin ETFs from firms including BlackRock, Fidelity, and Grayscale. The token was trading at $39,300 at midday Tuesday, climbing slightly from lows earlier in the day.
The latest decline wipes the gains from a strong rally that kicked off at the end of last year. From October to January 11, the day after regulators gave the green light for the new products, bitcoin surged 70% to $46,000.
"It's classic 'buy the rumor, sell the news,'" Tuttle Capital Management chief executive Matthew Tuttle told Business Insider. "A couple weeks back, everyone pretty much knew the ETFs would get approved, and you saw bitcoin's price ramp up. People bought it up in anticipation, then took their profits."
To that point, over recent months, the overwhelming sentiment among market strategists on bitcoin has been bullish. The ETFs usher in more mainstream acceptance and allow for a wider share of investors to gain exposure to crypto without buying a token outright.
Fundstrat's Tom Lee, for one, forecasted earlier this month that the spot ETFs could help bitcoin jump to $500,000 over five years. Standard Chartered analysts said it could top $200,000 within two years. While those predictions still have a long time to pan out, the showing in the wake of the SEC's approval has been decidedly weak.
Fairlead Strategies founder and managing partner Katie Stockton told Business Insider that the recent short-term breakdown for bitcoin doesn't mean it isn't a good investment over the intermediate- to long-term. The sell-off, she explained, comes at a natural place on the price chart, as it followed a strong move higher.
"The pullback shouldn't be instilling any massive panic," Stockton said. "It does not appear to be a bearish reversal to us."
Even though the market anticipated the approval of the products, Fairlead expects bitcoin to trend higher, and Stockton said longer-term indicators suggest momentum remains intact.
"Maybe the rally got extended on the [spot bitcoin] news, but I do think it's positive for bitcoin and crypto," she said. "It enhances the ability for people to invest, and with that comes more institutional relevance."
Tuttle also remains optimistic despite the latest dip. He said if he had to pick whether to go long or short on bitcoin, he would choose the former.
"Client interest in bitcoin ETFs has increased," Tuttle said. "And I think demand for those will drive demand for the cryptocurrency."
