Crypto fans got what they want. So why is bitcoin falling?

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By Krystal Hur • Thursday, January 25

Good morning! In today's newsletter: Why bitcoin is falling after spot ETFs got regulatory approval. Plus, 3 surprising reasons to be happy about the US economy.

US stock futures are little changed, but Tesla is slumping premarket after Elon Musk warned of slower growth. European markets are slipping lower, but indexes in Asia closed with gains, led by a rebound in Chinese stocks after Beijing moved to end a protracted rout.

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What's happening now in markets:

▲ Dow Futures 37,980.00 (0.00%)

▲ S&P 500 Futures 4,902.00 (+0.07%)

▲ NASDAQ Futures 17,648.00 (+0.15%)

▼ 10 Year 4.167%

▼ Gold $2,015.10 (-0.00%)

▲ WTI Crude Oil $75.94 (+0.01%)

▼ Bitcoin $39,818.00 (-0.82%)

Fear & Greed Index

Extreme Greed is driving the US market

MARKET DATA AS OF 7:35 AM ET

MARKETS FLASH

Here's why bitcoin is falling

Photo illustration of a novelty bitcoin token on a computer keyboard. (Matt Cardy/Getty Images)

Major cryptocurrencies were on a tear at the end of last year, driven higher by anticipation that US regulators would approve bitcoin exchange-traded funds, broadening the potential pool of investors.

Once those funds received the go-ahead, bitcoin fell. What gives?

Bitcoin topped $47,000 early this month for the first time since April 2022, as investors anticipated that the US Securities and Exchange Commission would approve the first ever exchange-traded funds tracking the spot price of bitcoin.

But the cryptocurrency declined after the favorable SEC decision duly came on January 10. Bitcoin edged below $40,000 earlier this week for the first time since December.

The price of the cryptocurrency was trading at roughly $39,519 a coin as of 4 pm ET on Wednesday.

So, why is the price of bitcoin falling, even after investors got what they wanted? Part of the reason is likely a "buy the rumor, sell the news" mentality, according to Antoni Trenchev, co-founder of crypto lender Nexo. That's the idea that the price of an asset often rises in anticipation of an announcement and then falls as investors take profits once the news actually comes out.

Interestingly, bitcoin ETF activity actually shows net buying.

Investors have pulled about $4.4 billion from the Grayscale Bitcoin Trust since it was converted to an ETF on January 11, according to Coinshares data through Wednesday. Greyscale's fund is the largest bitcoin ETF, holding roughly $20 billion in assets.

But those flows have been offset by about $5.3 billion poured into nine other spot bitcoin ETFs.

ETFs hold just a small portion of the bitcoin that's traded, says Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. That means "the call is coming from inside the house. Someone who pre-owned the crypto is doing the selling," he said.

Bitcoin has made its way higher over the last year since plummeting to below $17,000 in late 2022, after cryptocurrency exchange FTX filed for bankruptcy and set off a firestorm in crypto trading. Still, it remains well below its record high of roughly $69,000 reached in November 2021.

"We're used to this kind of volatility in the space. What matters now is what's coming next that could generate excitement around cryptos and deliver further gains," wrote Craig Erlam, senior market analyst at OANDA, in a note on Tuesday.

VOICES

German train drivers begin six-day strike

"The ongoing wage dispute is damaging Germany as a business location. We appeal to all parties involved to return to the negotiating table quickly and find a solution."

SPOKESPERSON, GERMAN ASSOCIATION OF THE AUTOMOTIVE INDUSTRY

Read more from CNN Business

NEWS FLASH

Your 401(k), gas prices and homes: 3 reasons to be happy

Consumer surveys are capturing a more upbeat sentiment. (Halfpoint Images/Moment RF/Getty Images)

Americans have been fed up with an economy that many feel isn't working for them, and the 2024 election may turn out to be a referendum on that gloomy sentiment. But the winds may be changing: 401(k) plans are on fire. Consumer sentiment is surging. Gas prices have fallen. The country's economic vibes are finally vibing again, according to an analysis by my colleague Bryan Mena.

The years-long economic funk was largely driven by the unforgiving pain of high inflation. A tough housing market and exorbitant child care costs continue to bedevil budgets, but the inflation pendulum is finally swinging in the other direction.

Inflation is down substantially from its four-decade peak in the summer of 2022. A powerful US stock rally is now back on track, mortgage rates have eased a bit in recent weeks and the job market remains in great shape, with unemployment near historic lows.

None of this guarantees the good times will continue, of course. Conflicts abroad could push up prices for oil and other consumer goods, for example.

But consumer surveys have begun to capture a shifting, more upbeat sentiment among Americans. Here are three reasons to be happy about the current state of the US economy. (At least for now.)

Read more here.

UP NEXT

Earnings from American Airlines, Southwest Airlines, Alaska Airlines and Visa.

Plus, the US Commerce Department releases its first estimate of fourth-quarter gross domestic product and the European Central Bank announces its latest interest-rate decision.

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WHAT WE'RE READING AND WATCHING

▸ China tries to halt market rout by boosting lending, wooing investors (CNN)
▸ Hewlett Packard Enterprise reveals hack by Russian state actor (CNN)

▸ Wall Street firm hit by cyberattack that has knocked systems offline (CNN)

FINAL WORD

Janet Yellen: It's still too hard to be a working parent in America

In a major speech set to be delivered Thursday in Chicago, Treasury Secretary Janet Yellen plans to detail her vision for helping middle-class families overcome affordability challenges, according to excerpts shared first with CNN.

"Our economic agenda is far from finished. There's much more the President and I would like to do to support the middle class," Yellen plans to say during the speech at the Economic Club of Chicago.

Treasury officials have billed the speech as one of the most significant Yellen plans to deliver this year and an effort to set the tone for her domestic agenda during 2024, reports my colleague Matt Egan.

Yellen plans to balance the Biden administration taking credit for the economic recovery from Covid-19 with acknowledging that many Americans are frustrated with how expensive it is to buy a house, raise children and save money for college.

"It is still too hard to be a working parent. We need to get American families access to affordable child care and other support for their children," Yellen is set to say, according to the excerpts.

Read more here.