Bitcoin Price Drops After Spot ETF Approval: What Does This Mean for Investors?

Bitcoin price weakens only days after highly anticipated spot ETF is approved.

Bitcoin price drops after ETF approval. Are investors feeling bearish?

Bitcoin experienced a 6.8% drop in price on January 11th and 12th, following the approval of a spot Bitcoin exchange-traded fund (ETF). This decline seems to confirm the theory that a “sell-the-news” event occurred after the ETF’s launch. Although there was much anticipation leading up to the event, with a 75% rally in the 90 days prior, the lack of excitement and subsequent correction down to $43,180 has left traders wondering if investors are becoming bearish.

The Fear of Market Makers and Whales

Traders are speculating that market makers and whales who attempted to buy ahead of the spot ETF launch may now be forced to sell at a loss. This could be one reason for the downward pressure on Bitcoin’s price. Additionally, Bitcoin miners may feel the pressure to sell some of their holdings in anticipation of the upcoming halving, which is less than 100 days away. Despite the profitability of mining operations, the upcoming reduction in block subsidy by 50% will significantly affect margins, leading to increased outflows of Bitcoin from miners to exchanges.

Miner Flow and Bitcoin Price Correlation

While some instances show a correlation between Bitcoin miners’ net flows and price bottoms, it’s important to note that this data may also be coincidental. There is no concrete rationale for a relationship between these two factors. The chart displaying miner transfers also includes many instances of large transfers with no significant impact on the price. Therefore, it is crucial to analyze other factors to determine market sentiment accurately.

Bitcoin Derivatives and Investor Interest

Analyzing Bitcoin derivatives can provide insights into whether traders are turning bearish. The aggregate futures open interest has increased by 14% to 446,500 BTC, indicating that investors’ interest in leverage positions remains strong. Notably, CME leads the market share with 135,480 BTC contracts. This sustained interest in leverage positions implies that investors are still optimistic about Bitcoin’s future trajectory.

• The Grayscale Bitcoin Trust Moves $41 Million Worth of Bitcoin as Redemptions Begin: A Closer Look at the Impact
• Bitwise’s Bitcoin ETF Leads the Pack in Inflows, Fidelity’s Fund Follows Close Behind 🚀
• Lido DAO: Riding the Wave of Success 🌊🚀

Retail Traders and Leverage

Perpetual contracts, or inverse swaps, are an essential aspect to consider when evaluating retail traders’ influence on Bitcoin’s price action. These contracts include an embedded rate, typically recalculated every eight hours, which indicates the demand for leverage among long positions. Currently, the BTC futures funding rate has stabilized at a mere 0.2% per week since January 4th, suggesting a balanced demand for leverage between longs and shorts. Thus, the recent sell-off does not seem to be driven by excessive leverage from retail traders.

Put-to-Call Ratio for Bitcoin Options

Another way to gauge market sentiment is by examining the put-to-call ratio for Bitcoin options volume. A ratio of 0.70 indicates that put option open interest lags behind the more bullish calls, suggesting a bullish sentiment. Over the past seven days, the put-to-call ratio has fluctuated between 0.35 and 0.65, reflecting lower demand for put options. If investors were truly concerned about a potential price crash, this ratio would have shifted to a more balanced proportion. Thus, the data suggests that investors are not betting on a price decline.

Spot ETF Challenges and Uncertainty

Part of Bitcoin’s dip on January 12th can be attributed to the lack of information surrounding how the spot ETF works in terms of creation, redemption, and price formation. Differences between issuers can lead to lag time in inflow data. Additionally, skepticism arose after multiple false ETF approval alerts and the fear, uncertainty, and doubt caused by brokers not allowing clients to invest in the sector. The uncertainty surrounding the opening of spot Bitcoin ETFs after weekend pauses and the potential volatility outside regular market hours further contributed to panic selling and the recent price correction.

Future Outlook and Recommendations

Based on the analysis, Bitcoin’s price correction after the spot ETF approval does not necessarily indicate a bearish sentiment among investors. While some short-term factors may have influenced the price drop, the overall interest in Bitcoin derivatives and the current put-to-call ratio suggest that investors remain optimistic.

It is always important to keep an eye on market trends, investor sentiment, and any upcoming events or regulations that could impact Bitcoin’s value. As with any investment, thorough research and a long-term perspective are key. Bitcoin continues to be an exciting asset with potential for growth and adoption in the years to come.

🔍 Here are some valuable resources for further reading on this topic: 1. BTC Blasts Past $47K as Bitcoin ETF Excitement Gets Feverish 2. BTC Price at $43K: Smart Money Bets Big on Bitcoin Ahead of Potential ETF Approval 3. 100 Days Until Halving: 5 Things to Know About Bitcoin This Week 4. Real Implications of Cash Creation Instead of ‘in Kind’ 5. Bitcoin Bullish Bets Costlier Than Ever as Funding Rates Hit Record 66%

📢 What are your thoughts on the recent Bitcoin price drop? Do you believe it indicates a bearish sentiment among investors? Share your opinions and join the discussion below! And don’t forget to share this article with your friends on social media.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!