Bitcoin Price Sells After ETF Approval – Have Investors Turned To Ambience?
The price of Bitcoin fell by 6.8% between January 11 and January 12, after the adoption of a Bitcoin exchange-traded fund (ETF) in place of a sell-the-news-type event that confirmed the bearish theory. After a 75% rally in 90 days to the first trade on January 11th, the much awaited event took place. This partly explains the lack of excitement and the subsequent price adjustment to $43,180.
After several attempts to break above $47,000 last week, traders are questioning whether investors are becoming weak. On the one hand, there is some reason behind the fear, namely that market makers and whales who tried to run the position in front of ETF issuers by buying before launch may be forced to sell at a loss – if this hypothesis is correct. Additionally, Bitcoin (BTC) miners may feel pressured to sell some of their holdings as the halving is less than 100 days away.
No matter how profitable Bitcoin mining is, a 50% drop in block subsidy will have a significant impact on margins. According to Bitcoin News, mining activity has risen to a six-year high as roughly $1 billion worth of BTC has been sent to exchanges.
NEW: Outflow of #Bitcoin miners hits six-year high as more than $1B worth of #Bitcoin is shipped to exchanges.pic.twitter.com/Jr4VFdoCPo
— Bitcoin News (@BitcoinNewsCom) January 12, 2024
However, according to CryptoQuant's data, a handful of other major price increases in BTC from miners have been linked to June 2022, November 2022, March 2023 and August 2023. There is no causal relationship between the net flows of Bitcoin miners and the short-term BTC price, and the same chart shows large transfers that do not have much meaningful price impact.
Traders need to analyze Bitcoin derivatives to understand if they are effectively turning bearish. For starters, total futures open interest increased by 14% to 446,500 BTC from 392,130 on Jan. 5, which means that investor interest in leveraged positions has not faded and has not been negatively impacted by liquidity. It is worth noting that CME is the absolute leader with 135,480 BTC contracts, a market share of 30%.
Next, one needs to analyze how the retail traders influence the price action. Perpetual contracts, also known as reverse swaps, typically include an embedded rate calculated every eight hours. Positive funding indicates increased leverage among long (buy) positions.
The data shows that since January 4, BTC futures have been stable at just 0.2% weekly, indicating balanced interest between longs and shorts (selling). Basically, the recent sell-off isn't caused by retailers taking advantage of excess leverage, nor are those investors betting on price cuts.
Traders can gauge market sentiment by measuring whether more activity is going on with call (buy) options or put (sell) options. A call-to-call ratio of 0.70 indicates that an option's open interest is more bullish calls delayed and therefore, bullish. On the contrary, the indicator of 1.40 puts options, which can be considered as a doozy.
The volume of call options for Bitcoin has hovered between 0.35 and 0.65 over the past seven days, reflecting the low volume of put (sell) options. If investors fear a possible BTC price crash, such volume has experienced a change in equilibrium ratio.
Related: Ethereum Price Rises As Bitcoin Falls – Did ETH Steal BTC's Thunder?
Part of Bitcoin's dip on January 12 can be explained by the lack of information on how the position works in terms of ETF creation, redemption and price creation. For example, there are slight differences between issuers, so the earnings data may be delayed by two days. Additionally, traders became very skeptical after several false ETF confirmation alerts and FUD (Fear, Uncertainty and Suspicion) not allowing clients to invest in the sector.
Additionally, no one knows how the Bitcoin ETFs position will open after the weekend stop and the volatility outside of regular market hours. If one is uninformed and doesn't fully understand the ETF's impact, including how new it is to the industry, traders will sell to avoid negative surprises – heightening the FUD behind the recent price correction.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
