- The approval of several Bitcoin spot ETFs marked a watershed moment for the crypto industry, but price action does not agree.
- BTC crashed nearly 15% between January 11 and 12, casting doubts on whether the ETF launch is a sell-the-news event.
- History shows that major events have caused steep sell-offs, while some have marked cycle tops.
The first Bitcoin spot ETFs were available for trading in the US on January 11, which caused BTC to crash by double digits. This move sparked a debate about whether the ETF approval is a sell-the-news event or will be a turning point to the 2023 bull rally.
Read more: Dissecting the $4.6 billion Bitcoin ETF debut: New capital or clever shuffle?
Bitcoin price reaction to spot ETF approval
The optimism due to the spot ETF approval vanished on January 11 as ETFs were available for trading. The approval from the SEC pushed Bitcoin price up by 6% to $48,975 led to a roughly 15% crash after less than 48 hours.
The sudden decline in Bitcoin price has prompted investors to worry if this was a sell-the-news event that could trigger a deeper correction or a potential cycle top. Let’s break down some of the popular outlooks that crypto investors expect.
BTC/USDT 1-hour chart
BTC history of sell-the-news events
December 18, 2017 - Chicago Mercantile Exchange (CME) launches the first Bitcoin futures contract. Like Bitcoin spot ETF approval in 2024, this decision from CME was a watershed moment for the crypto industry when the news outlets tagged Bitcoin and the larger crypto market as the Wild West. Regardless, this event marked the cycle top for BTC at $19,785 (or roughly $20,000).
September 23, 2019 - Bakkt platform goes live. This event was considered a gateway for institutional investors. The Bakkt platform launched its digital asset marketplace offering physically settled Bitcoin futures contracts and warehousing. The launch of Bakkt was dubbed a turning point that would attract institutions into crypto, but Bitcoin price crashed 20% in under two days after the launch and continued its descent for nearly three months.
April 14, 2021 - Coinbase's direct listing on the Nasdaq Global Select Market, dubbed the Coinbase IPO, was a highly anticipated event. The market was euphoric with the massive success of NFTs, but the high retail interest coupled with the Coinbase IPO marked the bull market rally top at $64,898.
January 11, 2024 - Bitcoin spot ETF approval on January 10 pushed BTC up by roughly 5%, but the pioneer crypto crashed by 15% in the ETFs’ first trading day on January 11.
Is this a sell-the-news event? Let’s explore further.
To understand if the ETF launch is a sell-the-news event, investors need to know where the selling pressure is coming from. As outlined in a previous article, ETF trading has not attracted new capital as of yet, or at least not enough to overcome the selling pressure.
According to CoinGlass data, Grayscale Investment has seen redemption worth nearly $36 billion in the last month. In just the last week, nearly 138.47 BTC worth $5.88 billion of BTC has been redeemed.
Grayscale’s GBTC Holdings
Investors holding GBTC shares can redeem them by returning those shares to Grayscale in exchange for the underlying Bitcoin. While it might look like it, not all of the redeems amount to selling. Some of these investors could be switching to ETFs due to Grayscale’s high management fees of 1.5%.
Due to Grayscale’s large lock-up period and high fees, the first few days of trading were essentially rebalancing flows, which could have flipped ETF approval euphoria on its belly. But as the smoke clears, retail investors are likely to find that this was a buy-the-dip or rumor event.
Concluding thoughts
Now that the context of the recent crash is clear let’s explore some of the most talked about scenarios that investors are expecting.
BTC/USDT 1-day chart
Bitcoin price will crash to $12,000: This outlook is held by very few investors, who are expecting a sweep of the sell-side liquidity resting below $24,000 and $15,000. The chances of this happening now are highly unlikely without a major black swan event.
Bitcoin price will crash to $35,000: A sizeable group of market participants are expecting this logical outlook. This crash is not unheard of when looking at the previous bull rally corrections.
Bitcoin price will continue bull rally to new all-time highs: Unlike the first and the second scenarios, many investors believe this short-term correction could end soon and catalyze BTC to continue its bull rally.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
LINK price jumps 10% as Chainlink races toward tokenization of funds
Chainlink (LINK) price has remained range-bound for a while, stuck between the $16.00 roadblock to the upside and $13.08 to the downside. However, in light of recent revelations, the token, which powers the verifiable web of the decentralized computing platform, may have further upside potential.
Gaming token Notcoin down by almost 50% after airdrop launch
NOT experienced a rapid decline hours after its anticipated launch on Thursday, shedding almost 50% of its value. This continues the cycle of huge selling pressure faced by cryptocurrency airdrops after their launch, especially the launch of gaming tokens in recent times.
Ethereum drops below $3,000 again, spot ETH ETF sparks debate in crypto community
Ethereum again went below the $3,000 key level on Thursday after posting signs of a rally. The price action follows predictions from the community regarding the SEC's decision on spot ETH ETFs next week.
SUI price defends $0.8880 amid multiple Sui network integrations
Sui (SUI) price failed to heed to the broader market recovery on Wednesday, extending the fall to the $0.8880 support level. However, with multiple network integrations in the works, the altcoin has pivoted around this level and is scaling a recovery.
Bitcoin: Why BTC is close to a bottom
Bitcoin (BTC) price efforts of a recovery this week have been countered by selling pressure during the onset of the American session. However, the downside potential appears to have been capped.