Bitcoin Battles Price Slump Amid Strong Dollar and Grim ETF Outlook
Summary:
As Bitcoin continues to experience a decline in price, Bitcoin traders' hopes for the newly introduced Bitcoin ETFs to spur an increase have not been fulfilled. The currency market faces a strong U.S. dollar, while the massive outflows from Grayscale Bitcoin Trust since the start of spot Bitcoin ETFs escalate the problem. The dollar's recovery and an optimistic outlook for the USD Index due to encouraging U.S. economic data present another challenge for the Bitcoin market. The current Bitcoin correction stems from a refusal at the upper boundary of an ascending parallel channel, noted market analyst Ali. While negative sentiments around ETFs persist, analysts anticipate fear-driven selloffs from inexperienced traders.
Bitcoin enthusiasts face hefty losses following the recent dip in the cryptocurrency's prices. Despite high hopes for the newly introduced Bitcoin ETFs to bolster prices, the market downturn remains sharp coupled with a resilient U.S. dollar that’s adding to traders' concerns. The U.S. dollar Index, which gauges the currency against a number of major foreign currencies, has jumped an impressive 2.71% since hitting its lowest point at 100.617 on 27th December. This rise comes on the back of uplifting U.S. economic figures including retail sales, the Philly Fed Manufacturing Index and weekly initial jobless claims; all of which have contributed to lifting the USD Index to unprecedented 2024 highs, between 103.65-103.70.
Accompanying data from the U.S. Census Bureau revealed a growth of 0.6% in retail sales for December 2023, beating the anticipated 0.4% and exceeding the previous period's figure of 0.3%. Additionally, the dollar’s bounce-back is largely credited to a surge in U.S. yields along the yield curve, a consequence of reduced speculation that the U.S. Central Bank could be contemplating interest rate cuts as early as the upcoming March.
Analysing the situation from a technical viewpoint reveals an optimistic outlook for the USD Index, hinting at a further rise of 1.12% owing to the formation of a classic V-shaped recovery pattern. In the event that the DXY breaches its resistance level of 104.56, there could be a prolonged recovery phase, potentially edging up to 107 over the forthcoming months.
Bitcoin traders are also grappling with massive outflows from the Grayscale Bitcoin Trust (GBTC) since the initiation of spot Bitcoin ETFs on January 11. Grayscale has been forced to offload a significant amount of Bitcoin within its GBTC holdings following the departure of almost 38,000 BTC after GBTC's transformation into a spot ETF on January 11.
On one particularly grim day, Grayscale endured an outpouring of $484 million as GBTC investors seized open redemption opportunities. It has also been reported that despite the arrival of the spot Bitcoin ETF, BTC prices remain unresponsive due to extensive outflows from Grayscale's GBTC product. According to economist Peter Schiff, despite larger aggregate inflows, their impact on the comprehensive BTC market seems to be minimal.
Besides, an independent market analyst called Ali highlighted that the current BTC price correction is resultant from rejection at the upper boundary of $48,000 of an ascending parallel channel formulated since late 2022. Ali expects a setback for Bitcoin with potential retraction to the lower boundary at $34,000.
Market analysis company Santiment, however, assures that the optimism about the long-term implications of the spot Bitcoin ETFs permitted by the U.S. Securities and Exchange Commission still exists. All the same, it cautions that if negative sentiments related to the ETFs weigh on, fear-driven selloffs from inexperienced traders could follow.
Published At
1/19/2024 11:09:40 PM
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