CryptoQuant Report: ETF Approval Could Lead to "Sell the News" Price Action for Bitcoin

2023-12-29 06:22:32

Last updated: December 28, 2023 21:22 EST . 1 min read

Disclosure: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. By using this website, you agree to our terms and conditions. We may utilise affiliate links within our content, and receive commission.Source: Adobe / Anna CocoThe expected approval of a spot Bitcoin exchange-traded fund (ETF) in January might not translate into a price surge for the cryptocurrency, according to a note by blockchain data firm CryptoQuant.

The note, which was shared with CoinDesk, suggested that the approval of the Bitcoin ETF could trigger a “sell the news” event, causing the number one cryptocurrency’s price to drop, potentially to as low as $32,000.

According to CryptoQuant’s data, $32,000 is the current short-term holder realized price, a key on-chain metric often tracked by traders.

Source: CryptoQuant/X.comThe term “sell the news” refers to a phenomenon in financial markets where prices move higher ahead of a bullish event, only to see them decline shortly after. The phenomenon occurs as experienced traders take advantage of the crowded long trade, leading to the closure or liquidation of a large number of leveraged positions.

Will ETF lead to increased institutional adoption?

The potential approval of an ETF is generally seen as a bullish event as it opens the door for more institutional inflows into Bitcoin.

According to Grayscale CEO Michael Sonnenshein, a spot ETF means that as much as $30 trillion in “advised wealth” can potentially be invested in Bitcoin.

However, CryptoQuant noted that the current high unrealized profit margins of around 30% for short-term Bitcoin holders historically precede price corrections, as observed in previous instances.

“Moreover, short-term holders are still spending Bitcoin at a profit, while rallies usually come after short-term losses are realized,” the note said.Top of Form

At the time of writing on Friday, Bitcoin traded at $42,823, down by 2% for the past week.

A price of 32,000 after the ETF approval, expected by January 10, would mean the price needs to drop over 25% from its current level to a level not seen since October.

BTC price in 2023. Source: CoinGecko

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