A paradoxical scenario is emerging as the crypto market anticipates the potential approval of spot Bitcoin ETFs (exchange-traded funds) in early 2024. While such approval might seem a harbinger of a bullish phase for Bitcoin, several experts suggest otherwise.
Their analysis indicates a potential downturn in Bitcoin’s price, with a forecasted decline to around $32,000 in January 2024.
Bitcoin ETFs and the “Sell-the-News” Phenomenon
CryptoQuant, a renowned analytics firm, noted that the market anticipates a 90% likelihood of spot Bitcoin ETF approvals by early January. This optimism, reflected in 32 meetings between ETF issuers and the US Securities and Exchange Commission (SEC), suggests constructive dialogue. However, it also sets the stage for a classic “sell-the-news” event.
“There are increasing odds that the ETF approval will be a ‘Sell-the-News’ event as Bitcoin market participants are sitting on high unrealized profits. For example, short-term Bitcoin holders are experiencing high unrealized profit margins of 30%, which historically has preceded price corrections,” analysts at CryptoQuant argued.
The recent announcement from Blackrock about seeding its ETF with $10 million is a bullish sign. Nonetheless, CryptoQuant highlighted the impact of miner behavior. With the recent surge in Bitcoin prices, miners are experiencing high unrealized profits and have started increasing their selling activities, which could contribute to downward pressure.
Read more: How To Prepare for a Bitcoin ETF: A Step-by-Step Approach
For these reasons, CryptoQuant predicted that Bitcoin may decline to as low as $32,000, which is where the short-term holder realized price sits.
Cathie Wood and Nic Carter Expect BTC Price to Decline
Cathie Wood, CEO and CIO of ARK Invest, also provided a more nuanced perspective. She acknowledged the possibility of a short-term sell-off but remains bullish on Bitcoin’s long-term prospects.
“It wouldn’t be surprising if we saw a sell on the news. That’s an expression in the market when you have a lot of anticipation a price moves up, the event happens and then, especially fast trading organizations, sell on the news. But beyond that, I think will be just a maybe a very short-term phenomenon,” Wood concluded.
Wood also cited the significant impact that even a modest institutional investment could have on the price of Bitcoin. She argued that “there are trillions of dollars in assets to be allocated” in Bitcoin, if these institutions move 0.1%, that will “move the needle.” Wood’s view is grounded in Bitcoin’s scarcity and the anticipated influx of institutional funds post-ETF approval.
Likewise, Nic Carter, funding partner at Castle Island Ventures, highlighted a dichotomy in the market’s response to the spot Bitcoin ETF approval. While agreeing with the short-term sell-off sentiment, he is also optimistic about the medium-term effects.
According to Carter, the ETF would unlock new capital classes, fostering structural flows that would benefit Bitcoin. He downplayed the impact of the halving event compared to the ETF’s potential to attract new investment.
“We may even see a news-selling event here. However, over the medium term, the ETF unlocks whole new classes of capital that otherwise wouldn’t be able to enter the market and haven’t been able to allocate to Bitcoin. So, I think you will see structural flows that will be positive for Bitcoin,” Carter emphasized.
Ali Martinez, Global Head of News at BeInCrypto, offered a historical perspective on Bitcoin. He noted that strong BTC performances towards the year’s end have often led to bearish trends in January. This pattern suggests that January 2024 could see a spike in profit-taking. Subsequently, it aligns with the other analysts’ predictions of a price drop.
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