The widely anticipated approval of over a dozen spot Bitcoin exchange-traded funds (ETFs) in the United States could be a sell-the-news event that would cause the price of BTC to move in the opposite direction.
According to the latest weekly report from market analytics platform CryptoQuant, the prediction is substantiated by market participants sitting on high unrealized profits from BTC’s recent ascent.
A Sell-the-news Event
Applicants for the spot Bitcoin ETFs have been in talks with the U.S. Securities and Exchange Commission (SEC) over time, hosting about 32 meetings this month to discuss changes and amendments to their filings.
The crypto community believes the series of meetings is a sign the ETFs would be approved between January 8-10, as expected, and analysts have given 90% odds of such an occurrence. Even BlackRock, one of the world’s largest asset managers vying for the ETFs, announced it would seed the product with $10 million on January 3.
Bitcoin is expected to skyrocket to new yearly highs after the approval as investors’ funds move into the ecosystem. However, CryptoQuant analysts argue the approval could be a sell-the-news event.
“Buy the rumor, sell the news” is a strategy that involves maximizing market movements in anticipation of an announcement that could trigger a positive price shift. Traders open positions on rumors to close when the news has broken, often making a profit. Unfortunately, this idea is driven by the fear of missing out (FOMO), and the price of the asset is likely to plunge due to selling pressure from market participants.
Bitcoin May Plunge to $32K
Market participants like miners and short-term holders are sitting on unrealized profits with margins as high as 30%, which has preceded price corrections, per historical data. While they are still spending BTC at a profit, rallies usually come after short-term losses have been realized.
CryptoQuant predicts BTC may eventually fall to $32,000, the short-term holder realized price, as traders have begun to pay too much to open long positions. This is evident in Bitcoin and Ethereum derivative markets, which show the highest funding rate over a year.
Additionally, sell volume is growing more than buy volume in Bitcoin and Ethereum derivative markets, and the Bull-Bear Market Cycle Indicator is still at high levels even after it exited the overheated bull phase.