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January 15, 2024

Bitcoin Succumbs to Sell the News Pressure as Spot ETFs Are Launched

January 15, 2024

Bitcoin faced a formidable “sell the news” phenomenon last week as the SEC, finally, granted approval for 11 Bitcoin Spot ETFs. 

Despite selling pressure, Bitcoin has regrouped support at $42,000 as the first two days of Bitcoin Spot ETF trading have been digested by the market.

Elsewhere, Larry Fink, the CEO of BlackRock has turned his attention to Ethereum ETFs, and Ark Invest’s, Cathie Wood, ups her 2030 price prediction of Bitcoin by 50%.

It’s been a wild week in the land of crypto, so let’s jump in.

Bitcoin succumbs to ‘sell the news’ pressure

After months of anticipation, 11 Bitcoin Spot ETFs were approved by the SEC on Wednesday and all 11 began publicly trading on Thursday.

As approval was granted, the price of Bitcoin spiked to 2-year highs of $48,900. 

However, after the immediate spike upward, Bitcoin markets fell over 7% during Friday’s trading.

While the initial performance of the funds was not as high as expected, the downturn in Bitcoin price is currently being attributed to a “sell the news” type event by the majority of crypto analysts.

“Sell the news” is a well-known term in the financial markets and describes how an asset’s price can fall after a news release due to the prior build-up of leverage and sentiment. 

Despite the fall in Bitcoin price surprising many, research firm CryptoQuant predicted last month that the launch of Bitcoin ETFs could trigger a move to $32,000 in the near term. 

According to a note from CryptoQuant to CoinDesk, traders’ unrealized profits lingered at a level that precedes a correction. 

In particular, short-term Bitcoin holders were experiencing 30% unrealized profit margins which is a level that, in the past, has preceded a correction. 

Bitcoin: short-term holder realized price and profit/loss margin
Bitcoin: short-term holder realized price and profit/loss margin

In addition to short-term holders, CryptoQuant also added that Bitcoin miners were also experiencing extremely high unrealized profits, which would further add to the selling pressure. 

After the fall on Friday, prices found support from the 200-day moving average and maintained a position just above $42,500. 

Bitcoin spot ETF performance over the first two days

In a striking sequel to the successful launch of spot bitcoin trading, the second day witnessed a robust performance with a total trading volume surpassing $3.1 billion. 

BlackRock and Grayscale emerged as the front-runners in the market, reinforcing the growing acceptance of cryptocurrency ETFs.

The cumulative trading volume for spot bitcoin ETFs reached an impressive $7.7 billion, following Thursday’s $4.6 billion trading activity. 

BlackRock led the pack among new spot bitcoin fund issuers, contributing $564 million in trading volume on Friday. 

Fidelity followed closely behind with a substantial volume of $431 million, as reported by data compiled by The Block.

However, it was Grayscale’s spot bitcoin ETF, a conversion of its flagship GBTC fund, that continued to dominate the market, boasting the highest trading volume of $1.8 billion on Friday. 

This followed its leading position on Thursday with $2.3 billion in trading activity. 

Contrary to initial speculation by Bloomberg analysts about potential outflows, it was later revealed that Grayscale’s ETF experienced a modest reduction of $95 million on Thursday.

James Seyffart of Bloomberg Intelligence regarded this result as a significant success, emphasizing that the actual outflow was only “a fraction” of the anticipated amount. 

The positive momentum continued from day one, where Bitwise led all rivals with the highest inflows of $238 million, closely followed by Fidelity with $227 million, according to Seyffart.

Industry experts view the first two days of spot bitcoin ETF trading as a pivotal moment, signaling increased investor accessibility to bitcoin and potentially fueling a positive trend throughout 2024.

Spot Bitcoin ETF volumes over first two days of trading
Spot Bitcoin ETF volumes over first two days of trading

BlackRock CEO sets focus on Ether ETF

CEO of BlackRock, Larry Fink, has expressed support for an Ethereum exchange-traded fund hot on the heels of the long-awaited debut of the Bitcoin ETFs.

In an exclusive interview with CNBC on Friday, Fink voiced his belief in the value of an Ethereum ETF, stating, “I see value in having an Ethereum ETF. These are just stepping stones towards tokenization, and I really do believe this is where we’re going to be going.”

CNBC interview with Larry Fink, CEO of BlackRock

As BlackRock continues its journey toward tokenization, there are indications that the asset management giant is exploring the possibility of listing an equivalent product for the native token of the Ethereum blockchain.

Tokenization, a process representing assets, be they physical or digital, in the form of a blockchain token, is seen by Fink as a transformative solution to issues such as money laundering and corruption.

During the interview, Fink also referred to Bitcoin as “an asset class that protects you” against geopolitical risks, drawing parallels with the historical role of gold over thousands of years.

“It’s no different than what gold represented over thousands of years,” Fink noted. 

He also highlighted a key difference, stating, “Unlike gold, we’re almost at the ceiling of the amount of Bitcoin that can be created,” emphasizing the scarcity factor that contributes to Bitcoin’s appeal as a unique asset within the evolving financial landscape.

Cathie Wood predicts $1.5M Bitcoin price by 2030

Renowned investor Cathie Wood, the CEO of ARK Invest, has adjusted her outlook on Bitcoin’s future value following the recent approval of spot Bitcoin ETFs by the SEC.

In an appearance on CNBC on Thursday, Wood expressed confidence in a bullish scenario, suggesting that Bitcoin could soar to an impressive $1.5 million by 2030. 

This marks a 50% increase from her previous projection of $1 million.

CNBC interview with Cathie Wood, CEO of Ark Invest
CNBC interview with Cathie Wood, CEO of Ark Invest

Wood attributed her revised optimism to the SEC’s green light for the long-awaited spot Bitcoin ETFs, emphasizing, “We think the probability of the bull case has increased with this SEC approval. This is a green light.” 

The ARK Invest CEO outlined alternative scenarios, projecting a bear case with a price of $258,500 and a base case of $682,800. 

ARK Invest substantiated its predictions by referencing a higher hashrate, long-term holder supply, and addresses with non-zero balances, particularly in comparison to previous market downturns. 

Interestingly, ARK Invest isn’t alone in forecasting significant Bitcoin price jumps. 

Standard Chartered Bank recently predicted a potential rise to around $200,000 by the close of 2025. 

Drawing parallels to the trajectory of gold following the launch of the first U.S.-based gold exchange-traded product in November 2004, the bank anticipates a similar surge in Bitcoin’s value over the next few years. 

The gold ETP holdings experienced a fourfold increase in value over seven years, providing an optimistic outlook for the potential growth of Bitcoin in the wake of the ETF approval.

Average annual gold price after first US gold ETF was approved
Average annual gold price after first US gold ETF was approved

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