Why iShares Bitcoin Trust ETF Stumbled on Monday
Key Points
The market largely shunned cryptocurrencies and related assets.
This was part of a broader pessimism about the near future of interest rates and the state of AI stocks.
On a blue Monday for its foundational cryptocurrency, iShares Bitcoin Trust ETF (NASDAQ: IBIT) also dipped into negative territory. Shares of the fund fell by 5% in value, on a notable decline not only with Bitcoin but also with many altcoins.
Chomping at the bit for new cuts
Investors clearly aren't feeling very confident about the immediate future of cryptos. Last week's rate cut by the Federal Reserve (Fed) was broadly expected by the time it occurred. Compounding that, the Fed hinted that it might be more resistant to further cuts across the coming months.
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While interest rates play a significant role in sentiment regarding risky assets like digital coins and tokens, investors also keep a close eye on other high-risk investments.
One grouping that falls under scrutiny is artificial intelligence (AI) stocks; the more pure-play titles in this basket are rightfully considered relatively high-risk, as they depend heavily on the takeup of the technology.
However, many market players are becoming wary of those pure-plays. Quite a few still don't produce meaningful revenue or profitability, and valuations can be awfully high. Investors have been shedding positions in AI stocks, a trend that was evident on Monday and had a knock-on effect on cryptocurrencies and associated ETFs, such as iShares Bitcoin Trust.
Trust in the future
I think the vaunted January Effect will provide a bit of positive momentum to cryptocurrencies, especially since the low-rate environment remains beneficial for them.
Many institutional investors adjust their holdings that month, and those that want some degree of risk will surely consider loading up with more crypto. When they do, their first choice in many instances will be Bitcoin. I'd look to iShares Bitcoin Trust ETF to rise very early next year.
Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and iShares Bitcoin Trust. The Motley Fool has a disclosure policy.