Bitcoin Momentum Slows Despite Economic Growth: Are ETF Approvals to Blame?
Summary:
Despite the U.S. economy showing growth, Bitcoin's surge to over $45,000 seems to be slowing down. The current dip isn't worrying all market analysts, as some predict Bitcoin could hit beyond $46,000 before an approval of a spot Exchange-Traded Fund (ETF). However, unverified rumors on January 3 of a possible ETF denial coincided with a sharp 8% Bitcoin price drop. Although a record number of 46.5 million BTC wallets remain profitable, reduced trading volumes may put further downward pressure on Bitcoin's price. Future price moves will likely continue to be influenced by macroeconomic events, regulatory decisions, and monetary policy changes.
Despite a positive job report indicating the growth of the U.S. economy on January 5, the spike in Bitcoin's value to over $45,000 in 2023 appears to lose momentum this week. Bitcoin enthusiasts are pushing to "buy the dip," yet their attempts seem to falter despite favorable movements in traditional market sectors due to encouraging economic forecasts. Even with Bitcoin’s price drop, not all market experts are perturbed, with some projecting BTC could climb beyond $46,000 before any approval of a spot ETF (Exchange-Traded Fund). Let's delve deeper into what's affecting Bitcoin's value today.
Much attention is being focused on the potential approval of a spot Bitcoin ETF, especially after substantial rumors around the expected timing and possible sanctioning of this ETF surfaced. On January 3, unconfirmed gossip circulated by a financial company intimated that the rejection of a spot Bitcoin ETF was imminent, culminating in a sudden 8% flash drop in Bitcoin's value. Only about 39% of financial advisors are confident that a spot Bitcoin ETF will get the nod in 2024. Many predict that U.S. regulators will buy more time by declining a series of spot ETF applications. Contrary to the anticipated rejection of the spot Bitcoin ETF, the crypto sector was filled with speculation concerning a decision by the SEC (Security and Exchange Commission) on January 5. Upon the non-arrival of the anticipated approval, Bitcoin's value took a hit and the rumor mill began churning once again.
It seems a steep shift in the Bitcoin futures market has contributed to the speed of the recent price decline. The sell-off of long positions aligned with the timeframe when a verdict on the spot Bitcoin ETF was predicted. On January 5, the long liquidations of Bitcoin spiked by $2.1 million within just five minutes. When BTC longs are liquidated and there's a lack of buying interest, Bitcoin's value suffers. Trading volumes of Bitcoin have seen a $6 billion dip since the peak on January 3.
Some market experts are questioning the endurance of the current Bitcoin price rally due to fluctuating liquidity and trading volumes. Over half (54%) of the futures market participants expect a price pullback and are therefore maintaining a short position on Bitcoin. Nevertheless, despite the setback in Bitcoin's price on January 5, a record number of 46.5 million BTC wallets remain profitable.
With so many wallets showing a profit, traders appear to be minimizing their risks, leading to the highest level of profit-taking seen in the last three months on January 4. This decline in trading volumes alongside such high profit-taking could generate further downward pressure on Bitcoin's price.
At present, it's clear that Bitcoin's price is largely influenced by macroeconomic events. Likely, further regulatory measures, news about ETFs, and changes in monetary policy by the Federal Reserve will continue to impact Bitcoin's price. Despite the current unrest, market players are still optimistic about Bitcoin's recovery, particularly given the increasing acceptance of BTC by financial institutions. Please note that this article is intended solely for informational purposes and should not be regarded as legal or investment advice. The viewpoints and opinions expressed here are solely those of the author and do not represent or reflect the views and opinions of Cointelegraph.
Published At
1/5/2024 11:03:42 PM
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