Why the iShares Bitcoin Trust ETF Lost 11.4% Last Month

The Federal Reserve’s cautious interest rate policies have put pressure on Bitcoin’s price in recent months.

Shares of the iShares Bitcoin Trust (IBIT -0.22%) exchange-traded fund (ETF) fell by 11.4% in June, according to data from S&P Global Market Intelligence. That decline mirrored the underlying Bitcoin (BTC -1.38%) chart, as the leading cryptocurrency dropped by 11% over the course of the month.

Key reasons behind Bitcoin’s price drop in June

As expected, the largest and most popular spot-price Bitcoin ETF tracked Bitcoin’s price moves almost precisely. There are always small spreads between Bitcoin ETFs and Bitcoin prices when looking at a period of several days since an ETF’s price only moves during the stock market’s standard trading hours while crypto prices never stop moving. But when the market is open, the two assets will be almost completely in sync, and their divergences will even out in the long run.

So why did Bitcoin have a bad month in June? There were a couple of driving factors:

  • Bitcoin investors keep a keen eye on the American economy. Digital assets are still a new and somewhat unfamiliar presence on Wall Street, and even the largest cryptocurrency is more often treated like a risky investment than a gold-like hedge against inflation. Therefore, the Federal Reserve’s cautious approach to normalizing interest rates has kept a tight leash on Bitcoin’s price chart in 2024.
  • The young crypto market is already haunted by some old ghosts. The Mt. Gox cryptocurrency exchange went out of business in 2014 after a hack that removed 850,000 Bitcoin from its coffers and user accounts. The attack stole assets worth $460 million at the time but $48.6 billion at today’s Bitcoin prices. Now, a decade later, Mt. Gox trustees are starting to repay the lost cryptocurrency, preparing to move 4.3% of the crypto’s total value into new accounts. On June 24, news of this repayment plan led to Bitcoin’s largest price dip of the month.
  • The twin growth catalysts of spot-price Bitcoin ETFs and the fourth halving of Bitcoin’s mining rewards inspired a lot of crypto traders earlier this year. But Bitcoin isn’t skyrocketing yet, and many newcomers to the asset have lost a bit of their earlier enthusiasm. That is making the asset more volatile, especially in a downward direction.

What to expect next from Bitcoin and its ETFs

Bitcoin’s halving events have historically been followed by price increases, as they decrease the rate of new coin creation. This suggests another surge may be coming soon.

Institutional investors are showing more interest in Bitcoin, and the introduction of ETFs has made it easier for them to invest in it. That’s another positive catalyst that should eventually increase Bitcoin’s open-market demand and raise its prices.

Moreover, the total supply of Bitcoin that can ever be in circulation is limited to 21 million coins, and more than 19 million of them have already been mined. This makes it a scarce asset like physical gold, and that scarcity combined with growing demand could also lead to long-term price increases.

The same catalysts also apply to the iShares Bitcoin Trust. Spot Bitcoin ETFs provide a convenient and secure way to invest in Bitcoin through traditional brokerage accounts, which removes the need for those investors to manage digital wallets or open additional accounts on crypto-focused exchanges.

This price dip might have created a good opportunity to invest directly in Bitcoin or buy it via the iShares Bitcoin Trust, but remember that the crypto market can be volatile. Patience is a virtue on the stock market, and even more so when investing in cryptocurrencies.

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