The anticipated approval of a spot Bitcoin exchange-traded fund (ETF) in January may not necessarily result in a cryptocurrency price surge, as indicated in a note from blockchain data firm CryptoQuant.
As per the note shared with CoinDesk, the approval of the Bitcoin ETF could potentially trigger a “sell the news” event, causing the leading cryptocurrency’s price to decline, possibly reaching as low as $32,000.
CryptoQuant’s data highlights $32,000 as the current short-term holder realized price, a significant on-chain metric frequently monitored by traders. The term “sell the news” refers to a phenomenon in financial markets where prices rise leading up to a positive event, only to witness a subsequent decline. This phenomenon occurs as experienced traders capitalize on the crowded long trade, resulting in the closure or liquidation of numerous leveraged positions.
Will ETF lead to increased institutional adoption?
The prospective approval of an ETF is typically regarded as a bullish event, as it paves the way for increased institutional investments in Bitcoin.
Grayscale CEO Michael Sonnenshein has pointed out that a spot ETF could potentially open the door for as much as $30 trillion in “advised wealth” to be invested in Bitcoin.
Nevertheless, CryptoQuant has highlighted that the current high unrealized profit margins of approximately 30% for short-term Bitcoin holders have historically preceded price corrections, consistent with observations from previous instances.
The note further emphasized, “Moreover, short-term holders are still spending Bitcoin at a profit, while rallies usually come after short-term losses are realized.”
As of the current writing on Friday, Bitcoin is trading at $42,823, reflecting a 2% decrease over the past week.
If the price were to drop to $32,000 following the anticipated ETF approval by January 10, it would signify a decline of over 25% from its present level to a point not observed since October.
