According to data provider CryptoQuant, the potential approval of a spot Bitcoin ETF product could be negative for the BTC price, contrary to expectations. Analysts expect BTC to drop to $32,000 following confirmation due to the ‘sell the news’ effect.
Bitcoin ETF approval will drop the price to $32,000!
cryptokoin.comAs you would expect from , market players are eagerly waiting for the SEC to approve a spot Bitcoin ETF product. However, a confirmation may not have the positive impact on BTC price as expected. CryptoQuant is talking about a potential “news selling” incident. In such a situation, he says, traders’ unrealized profits currently remain at a level that historically precedes a correction.
“Selling the news” is a well-known term in capital markets. It explains how asset prices, leverage, and sentiment rise towards a bullish event, but prices fall shortly afterwards. This is because clever traders take advantage of overcrowded long trades, trapping those with leverage and forcing them to close or liquidate as the price turns against them. Expectations are that the spot Bitcoin ETF approval will initiate inflows into Bitcoin from institutions. Thus, it will create consistent buying pressure. Market players perceive this as a bullish event. CryptoQuant makes the following assessment:
Short-term Bitcoin holders experience high unrealized profit margins of 30%, which have historically preceded price corrections (red circles). Moreover, rallies often come after short-term losses are realized, while short-term holders are still spending Bitcoin at a profit.
CryptoQuant says it is possible for Bitcoin price to drop as low as $32,000. He expects this to be the realized price of short-term holders.
The risk for long Bitcoin positions is higher than ever!
Capriole Investments is also evaluating potential approval of a spot Bitcoin ETF product. Analysts say that “conservative portfolio management” makes sense in this process. Capriole makes the following statement regarding this opinion:
Bitcoin is up over 60% since the ETF craze began a few months ago. While every man and his dog at X.com is waiting for a confirmation on or around January 10, we should start expecting much larger volatility events (up/down) in this area. The risk for long Bitcoin positions today is much higher than it was a few weeks ago.
Historical perspective also confirms the ‘sell the news’ phenomenon
In Bitcoin history, “sell the news” events are common. In 2017, BTC reached $20,000 after CME listed Bitcoin futures ETF products. Additionally, in 2021, the leading cryptocurrency rose to $65,000 after Coinbase completed its IPO. However, it lost ground in the following months. Bitcoin, which started the year at $16,000, is currently trading at $42,450. According to CoinMarketCap, the daily transaction volume is around 80 billion dollars.
To be informed about the latest developments, follow us twitter‘in, Facebookin and InstagramFollow on and Telegram And YouTube Join our channel!