- January 14, 2024
- Posted by: [email protected]
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The Bitcoin (BTC) market witnessed a significant downturn, experiencing a decline of more than 6% from the mid-$46,000s to the mid-$43,000s following the launch of the first 11-spot Bitcoin ETFs. The U.S. Securities and Exchange Commission (SEC) approved these ETFs on Wednesday, leading to their live trading debut on Thursday, which proved to be highly successful. LSEG data, as reported by Reuters, revealed an impressive $4.6 billion in trading volumes for the new spot Bitcoin ETFs on their first day.
This surge in trading activity, driven by higher-than-expected demand, propelled the Bitcoin price to fresh two-year highs exceeding $49,000. However, the enthusiasm was short-lived as profit-taking sentiments took hold, resulting in a bearish trend on Friday. The price reached a high of $49,000 on Thursday, marking a remarkable 90% rally fueled by optimism surrounding spot Bitcoin ETFs over the past five months.
Analysts had previously cautioned about the vulnerability of the market to a profit-taking pullback, commonly referred to as a “sell-the-fact” reaction. The recent bearish price action suggests that this anticipated reaction is materializing. Additionally, reports indicating a six-year high in Bitcoin miner outflows to exchanges might have contributed to market unease.
The latest drop in the Bitcoin price has broken below a one-week uptrend, with BTC now testing its 21-day moving average (21DMA) at $44,000. A convincing break below this level could open the door to a test of the 50-day moving average (50DMA) at $42,400, along with an uptrend originating from December.
Despite concerns of a more significant dip, data from coinglass.com indicates that the recent price drop was not driven by speculators getting liquidated. Only $64 million worth of leveraged long Bitcoin futures positions were stopped out on Friday, a relatively smaller amount compared to recent liquidation events.
While a return to sub-$40,000 levels is conceivable, uncertainties persist about how long the Bitcoin price would sustain at these levels. Market analysts anticipate long-term support from increasing Bitcoin ETF demand, an imminent Federal Reserve cutting cycle, and reduced supply following the Bitcoin halving in April. The historical pattern of Bitcoin’s four-year market cycle, coupled with positive fundamentals, suggests strong dip buying demand, making it unlikely for bears to push the price substantially below $40,000. As Bitcoin continues its cyclical rally, there remains optimism for the cryptocurrency to surpass $100,000 within the next 22 months, building on its historical trend of rallying for around three years after each year-long bear market.
