The recent approval of spot Bitcoin ETFs has had a significant impact on the cryptocurrency market. These ETFs have seen record trading volumes, while Coinbase’s OTC desk transfers have also reached their highest levels. However, it is important to note that Bitcoin ETFs are currently trading at a premium compared to spot Bitcoin, indicating a unique market trend.
Bitcoin Price Correction Has Just Begun
The approval of spot Bitcoin ETFs did not receive the expected optimism from analysts. In fact, it acted as a “sell-the-news” event, leading to a 15% decline in the price of Bitcoin since January 11. According to CryptoQuant, this correction may continue as short-term traders and prominent Bitcoin holders continue to sell. The selling pressure is further exacerbated by the fact that unrealized profit margins have not fallen enough to indicate exhaustion among sellers.
Coinbase’s OTC Trading Desks Witness Record Volumes
On the day of the Bitcoin ETF launch, Coinbase’s OTC trading desks experienced record-high volumes. Over 443,000 Bitcoin, equivalent to $19 billion, were traded. This surge in volume has led to Bitcoin funds trading at a premium compared to spot Bitcoin for the first time since March 2021. However, post-ETF approval, investor demand for Bitcoin in the US has decreased, as evidenced by the negative turn of the Coinbase premium for the first time in 2024.
Bitcoin Prices Decline to Sustainable Levels
From a short-term valuation perspective, Bitcoin prices have declined to more sustainable levels. The unrealized profit of short-term holders has dropped from 48% in December 2023 to 16% after the recent price decline. However, according to analysts at CryptoQuant, a further drop in profit margins below 0% may be necessary to officially signal a price bottom.
Inter-Exchange Flow Pulse (IFP) Indicates Caution
The Inter-Exchange Flow Pulse (IFP) has dipped below its 90-day moving average for the first time since August 2021. This indicates a halt in Bitcoin flows to derivative exchanges, which often signals caution and has historically preceded Bitcoin bear markets or price corrections.
Hot Take: Bitcoin Price Correction Continues, Caution Remains
The approval of spot Bitcoin ETFs has triggered a sell-off in the market, leading to a significant price correction for Bitcoin. Short-term traders and prominent holders continue to sell, reflecting a broader risk-off sentiment. The unrealized profit margins have not fallen enough to indicate exhaustion among sellers, suggesting that the correction may not be over. Additionally, the negative turn of the Coinbase premium indicates waning investor demand for Bitcoin in the US. It remains to be seen whether further drops in profit margins and caution signals will lead to a price bottom or further correction.
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