A slump in Bitcoin on Wednesday saw the cryptocurrency erase almost all gains it had made in the first days of this year, bucking a long-running upswing that outperformed a global malaise in traditional assets.

The world’s largest token fell as much as 9.2% to dip briefly below $41,000 shortly after 7 a.m. in New York, a day after the digital asset had topped the $45,000 mark in a 21-month high. Wednesday’s price swings are the largest in more than two months. The volatility also spilled over into crypto-linked stocks, with shares in the US crypto exchange Coinbase Global Inc. falling as much as 8.1% before paring the decline. 

“Volatility is increasing over the prospect of whether or not the SEC will approve a spot Bitcoin ETF,” said Bartosz Lipiński, chief executive officer the crypto trading platform Cube.Exchange. “Markets were a bit overbought.”

More than $600 million in positions across all cryptocurrencies on major exchanges have been liquidated so far on Wednesday, according to data by Coinglass. It’s the largest amount of liquidations since Dec. 11.

Bitcoin has been on a tear ahead of an upcoming Jan. 10 deadline that could see the US Securities and Exchange Commission approve the first exchange-traded fund tied directly to the asset’s spot price. The cryptocurrency’s value rose almost 160% in 2023, alongside a broader rally in digital-asset fortunes.  

Bitcoin Loses Ground
Even so, Matrixport analyst Markus Thielen said in a note on Wednesday that he expects the SEC will decline all Bitcoin ETF proposals this month. Thielen said recent applications will still fall short of requirements that must be met before the SEC signs off on them. If the SEC were to reject the proposals, some market watchers predicted issuers may opt to retaliate against the regulator.

Several issuers filed named authorized participants for their potential Bitcoin-linked products in recent days, a sign that the funds could be nearing approval. Among those named are Wall Street heavyweights Jane Street Capital and JPMorgan, who will be responsible for steering cash in and out of ETFs.

Other assets also fell in tandem with Bitcoin, which celebrated its fifteenth year since the mining of its first block on Jan. 3, 2009. Ether declined as much as 11% on Wednesday, while Solana’s SOL tumbled more than 28%, before both pared the declines.

“We will likely see some increased volatility in the short term as markets start to measure risk in all asset classes, as we enter a year that has many question marks,” said Fadi Aboualfa, head of research at crypto custodian Copper Technologies Ltd., in an email. “Regardless, we saw markets tank just the same at the start of December, only to rally up further.”   

This article was provided by Bloomberg News.