There is a principle we often encounter in traditional markets and cryptocurrencies; “Buy the rumor, sell the fact or the news”
At this point, we see that investors who bought the expectation before an event took place increased the price, and the price decreased with the sales after the expectation ended.
We observe that this principle often works in the crypto money markets as well.
When we look at Bitcoin specifically, we see that the crash in December 2017 coincided with the day when CME Bitcoin Futures started. Those who bought the expectation that Bitcoin would be listed on the CME started the bear market by taking a selling position on the day of the event.
Similarly, those who bought the expectation that Coinbase will be listed on the Nasdaq this year, took a sell-side position with the listing in April 2021, causing a huge decline.
So could the same scenario apply to Bitcoin futures ETF approval?
Recently, we have shared news that the extreme rise in Bitcoin price may be related to the expectation for ETF approval. Can those who buy the prospect now change their positions when the news comes true? We see that there are differences of opinion among analysts on this issue. This difference also signals that you need to manage your risk when that day comes.
Dan Morehead, Pantera Capital CEO: “Can you remind me the day before the Bitcoin ETF starts? I might want to get some money off the table,” he said, adding that he was concerned that the news would be sold.
Permission.io CEO Charlie Silver said it was “highly likely” that the SEC’s ETF approval would trigger sales. However, Silver added that there will be no change for long-term investors.
Bloomberg senior commodity strategist Mike McGlone disagrees with the others. Saying that the approval of the Bitcoin futures ETF is unlikely to trigger sales, the analyst said, “If it’s the way to a real ETF, it’s a very small step.”
Cross Tower business manager Chad Steinglass is also skeptical of Morehead’s approach.
“There is some data to support that the ‘buy the rumor, sell the news’ theory works in the crypto space. But I don’t think this is something to be trusted. There is also a lot of data showing that the right trade is to buy rumors and news.
In Ethereum, prices rose with the much anticipated London hard fork and then continued to rise higher. When Paypal added support for crypto in the fall of 2020, it added fuel to an already existing rally.
In my opinion, the main factor in determining whether an event will be a ‘sell the news’ event is all about how and why traders are positioned. ”
While it remains unclear what effect the Bitcoin futures ETF approval will have on the Bitcoin price, we see that the SEC’s timeframe is getting tighter. Until the SEC decision, investors who bought the prospect could help Bitcoin break the new high. However, it would be healthy to watch the reaction of the market for a while after the approval process.
*Not Investment Advice.