A paradoxical scenario arises as the crypto market eagerly awaits the potential approval of spot Bitcoin ETFs in early 2024. While such approval might be expected to signal a bullish phase for Bitcoin, several experts have projected a potential downturn in the cryptocurrency’s price, forecasting a decline to around $32,000 in January 2024.
Bitcoin ETFs and the “Sell-the-News” Phenomenon
Renowned analytics firm CryptoQuant indicated a 90% likelihood of spot Bitcoin ETF approvals by early January. This optimism, reflected in 32 meetings between ETF issuers and the US Securities and Exchange Commission (SEC), suggests constructive dialogue but also sets the stage for a classic “sell-the-news” event.
CryptoQuant analysts argue that there are increasing odds that the ETF approval will be a ‘sell-the-news’ event as Bitcoin market participants are currently sitting on high unrealized profits. This is seen in the high unrealized profit margins of 30% for short-term Bitcoin holders, which historically has preceded price corrections.
The recent announcement from Blackrock about seeding its ETF with $10 million is a bullish sign. However, CryptoQuant highlighted the impact of miner behavior. With the recent surge in Bitcoin prices, miners are experiencing high unrealized profits and have started increasing their selling activities, which could contribute to downward pressure. CryptoQuant has predicted that Bitcoin may decline to as low as $32,000, which is where the short-term holder realized price sits.
Cathie Wood and Nic Carter Expect BTC Price to Decline
Cathie Wood, the CEO and CIO of ARK Invest, expressed a more nuanced perspective on the potential ETF approval, acknowledging the possibility of a short-term sell-off while remaining bullish on Bitcoin’s long-term prospects. Wood cited the significant impact that even a modest institutional investment could have on the price of Bitcoin, emphasizing the anticipated influx of institutional funds post-ETF approval. She emphasized that there are trillions of dollars in assets to be allocated in Bitcoin, and even a small percentage of movement from institutions will “move the needle.”
Similarly, funding partner at Castle Island Ventures, Nic Carter, highlighted a dichotomy in the market’s response to the potential spot Bitcoin ETF approval. While agreeing with the short-term sell-off sentiment, he is also optimistic about the medium-term effects, expecting the ETF to unlock new capital classes and foster structural flows that would benefit Bitcoin.
Ali Martinez, Global Head of News at BeInCrypto, offered a historical perspective, noting that strong BTC performances towards the year’s end have often led to bearish trends in January. This pattern suggests that January 2024 could see a spike in profit-taking, aligning with the other analysts’ predictions of a price drop.
