Spot Bitcoin ETF Approval May Not Trigger Price Surge, Says CryptoQuant
A note by blockchain data firm CryptoQuant suggests that the expected approval of a spot Bitcoin exchange-traded fund (ETF) in January might not result in a price surge for the cryptocurrency. The note proposes that the approval of the Bitcoin ETF could lead to a “sell the news” event, causing the price of Bitcoin to drop, potentially reaching as low as $32,000. This is based on CryptoQuant’s data, which shows $32,000 as the current short-term holder realized price, a metric frequently monitored by traders.
Understanding the “Sell the News” Phenomenon
The term “sell the news” refers to a phenomenon in financial markets where prices rise before a positive event and then decline shortly after. Experienced traders take advantage of the crowded long trade, resulting in the closure or liquidation of leveraged positions. This pattern often occurs when market participants anticipate bullish events.
Will ETF Approval Lead to Increased Institutional Adoption?
An approved ETF is generally considered a bullish event as it opens up opportunities for more institutional investment in Bitcoin. Grayscale CEO Michael Sonnenshein believes that with a spot ETF, up to $30 trillion in “advised wealth” could potentially flow into Bitcoin. However, CryptoQuant highlights that high unrealized profit margins for short-term Bitcoin holders historically precede price corrections.
Potential Price Impact and Current Market Conditions
At present, Bitcoin is trading at $42,823, representing a 2% decrease over the past week. If the ETF is approved by January 10, and assuming a post-approval price of $32,000, this would mean a drop of over 25% from its current level. Such a price would not have been seen since October.
Hot Take: CryptoQuant Report Raises Doubts About ETF’s Effect on Bitcoin Price
A report from CryptoQuant suggests that the approval of a spot Bitcoin ETF in January may not lead to the anticipated price surge. Instead, it could trigger a “sell the news” event, causing Bitcoin’s price to drop significantly. The report highlights that short-term holders are currently realizing profits and spending their Bitcoin, which historically precedes price corrections. While an approved ETF is generally seen as positive for institutional adoption, the high unrealized profit margins suggest a potential downturn. At present, Bitcoin is trading at $42,823. If the ETF is approved and the price drops to $32,000, it would represent a decrease of over 25% from its current level.
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