BTC ETF – Sell the news?

Anticipation surrounding the approval of a multitude of spot Bitcoin exchange-traded funds (ETFs) in the United States may not necessarily translate into the expected surge in Bitcoin’s price, according to insights from the latest weekly report by CryptoQuant, a leading market analytics platform.

BTC ETF 

The prevailing sentiment is that the approval of these ETFs, sought after through 32 meetings between applicants and the U.S. Securities and Exchange Commission (SEC) this month, could be a “sell-the-news” event. Despite widespread expectations of approval, there is a growing realization among market participants that the accumulation of unrealized profits from Bitcoin’s recent upward trajectory might lead to a market correction.

“Buy the rumor, sell the news” is a well-known trading strategy, and analysts at CryptoQuant suggest that this strategy might come into play post-approval. The fear of missing out (FOMO) often drives investors to capitalize on positive price expectations before the actual news is confirmed. However, once the news is out, selling pressure tends to dominate, causing the asset’s price to retreat.

Even with BlackRock, a major contender for the ETFs, publicly committing to seeding the product with $10 million on January 3, analysts caution that this may not guarantee the expected bullish run for Bitcoin. Market participants, including miners and short-term holders, find themselves in a position of holding unrealized profits with margins reaching up to 30%. Historical data suggests that such high margins often precede corrective price movements.

CryptoQuant’s analysis indicates a potential downside for Bitcoin, projecting a correction that could lead the cryptocurrency to fall to $32,000. This anticipated correction aligns with the trend observed in derivative markets for Bitcoin and Ethereum, where the funding rate is at its highest over the past year. Moreover, the growing sell volume in these markets, compared to buy volume, raises concerns about a potential downturn.

The Bull-Bear Market Cycle Indicator, despite exiting the overheated bull phase, remains at elevated levels, indicating a persistent risk of market correction. As the crypto community eagerly awaits the SEC’s decision on the spot Bitcoin ETFs, caution and awareness of the “sell-the-news” dynamics are becoming increasingly crucial for market participants navigating these volatile waters.