If ETF is approved, it may trigger a sell-off shift

Approval of ETF Could Prompt a Shift Towards Selling

Source: Bloomberg Compilation: Techub News-Irene

● Bitcoin rises 16% as the first US spot Bitcoin ETF is expected to launch

● Chart data indicates that Bitcoin’s rebound may face some resistance

Bitcoin has soared in recent days due to the expected approval of the first US spot Bitcoin exchange-traded fund (ETF). However, the question now is whether the actual approval of Bitcoin will further stimulate profit taking.

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As the largest digital asset, Bitcoin has risen 16% this week, surpassing $35,000 for the first time since 2022. In comparison, global stock markets are sluggish due to rising bond yields and deepening geopolitical uncertainties.

Players in the digital asset space believe that the introduction of spot ETFs by asset management giants such as BlackRock will stimulate wider adoption of Bitcoin. However, the approval time from the cautious US Securities and Exchange Commission (SEC) has yet to be determined. Mainstream demand has also been hit by the collapse of cryptocurrency exchanges such as FTX.

“The market has already digested the approval of the Bitcoin spot ETF. If approved, I expect there will be selling pressure,” said Hayden Hughes, co-founder of the trading platform Alpha ImLianGuaict.

The following chart data shows that the upward trend of Bitcoin has been overextended. Options bets indicate that some speculators expect Bitcoin to reach a target of $40,000 before the token stagnates. After the cryptocurrency crash in 2022, Bitcoin has doubled this year. As of 10:14 am London time on Thursday, October 26, Bitcoin’s price was stabilizing at $34,490, while smaller tokens such as Ethereum, Avalanche, and Dogecoin continued to rise.

Technical testing

The Fibonacci ratios, commonly used to help identify market reversals, indicate that Bitcoin’s rebound will face challenges in the area just below $36,000. This area is defined by the 38.2% Fibonacci retracement, which was the one-year crash of Bitcoin before November 2022.

Cici Lu McCalman, founder of blockchain consulting company Venn Link LianGuairtners, said that if the US spot Bitcoin ETF is approved, Bitcoin is expected to experience selling in the short term, but she added that in the long run, these products will be bullish on Bitcoin.

“Overbought” RSI

Bitcoin’s weekly relative strength index (momentum indicator) has broken 70 points for the first time since 2021. An index above 70 is considered “overbought.” This means that the likelihood of a sharp rebound in the near future, such as two consecutive intra-day increases of 10%, is low.

“The wild speculation surrounding the upcoming approval of ETFs may be a sign of other more structural bullish factors. For example, the steady clean-up of last year’s industry excesses and the new argument considering macro environment inflation hedging.” says Caroline Mauron, co-founder of digital asset derivatives liquidity provider OrBit Markets.

Derivatives Insight

The derivatives data from Deribit, the world’s largest cryptocurrency options exchange, shows a significant concentration of bullish bets on Bitcoin, with bets reaching $40,000 by the end of this year. This is 16% higher than the current level.

In a report, Morgan Stanley strategist Nikolaos LianGuainigirtzoglou and his team predict that the SEC will approve several spot Bitcoin ETFs before the final deadline on January 10th. The strategists also believe that “Any refusal could potentially trigger litigation against the SEC and bring further legal trouble to the organization.”

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