Bitcoin Weathers Plunge: Signs of Bottoming Out Amid ETF Outflows and On-Chain Indications
Summary:
This article outlines the recent Bitcoin plunge to its lowest in two months but suggests that the worst might be over. The inaugural trading fortnights of the US' first-ever Bitcoin exchange-traded funds (ETFs) have concluded and the outcomes imply an abatement in outflows from Grayscale Bitcoin Trust (GBTC). Indications of an oversold market have appeared and as Bitcoin stands at a 20% deficit compared to its recent highs, a lasting revival in BTC's price is expected. An on-chain indicator has mirrored the 2022 bear market floor, with Bitcoin veterans and enthusiasts have surrendered their coins to exchanges at a loss.
This week witnessed Bitcoin (BTC) plunging to its lowest in two months, but several indications imply that BTC's lowest price may have been reached. Following a dip to $38,500, data from Cointelegraph Markets Pro and TradingView indicate a continued rebound in BTC/USD. In the United States, the initial fortnights of trade for the country's first-ever Bitcoin exchange-traded funds (ETFs) have concluded. It appears that the outflow from Grayscale Bitcoin Trust (GBTC) is abating, nourishing hopes of an overall decrease in institutional selling pressure.
Concurrently, on-chain data hint at a "market oversells" scenario. As Bitcoin stands at a 20% deficit compared to its recent highs, prospects are looking up for a lasting revival in BTC's price. However, nothing is set in stone – evidently, even those who hold onto their coins irrespective of market trends, have demonstrated signs of surrendering.
The premiere spot Bitcoin ETFs in the United States are currently the trending topic in BTC price evolution. Despite attracting billions in inflow since their inauguration on January 11th, the ETFs have overseen a 20% downturn for BTC/USD. Market players attribute this trend mainly to one ETF – the Grayscale Bitcoin Trust (GBTC). GBTC's transformation into an ETF has facilitated long-trapped investors to divest – although they may consider investing in another Bitcoin product, regulations mandate a one-month hiatus.
Major chunks of BTC dispatched by Grayscale to custodian Coinbase have been criticized for having minimal correlation with Bitcoin's ongoing downward sloping trajectory. Instead, culprits for the slump could be sales by the defunct FTX exchange and derivatives liquidations. This is temporary and might have already ended. With the continuous reduction in GBTC outflows, BTC/USD might have reached its lowest this week.
In an unexpected twist, a well-established Bitcoin on-chain indicator has echoed the bull market floor of 2022, as BTC price teetered towards the mark of $38,000. The Advanced Network Value to Transaction (NVT) Signal currently denotes a proportionately nominal value of recent transactions relative to Bitcoin's aggregate market cap.
With this week's decline, Bitcoin veterans and enthusiasts have found their resolve put to the test. On-chain data substantiates that even long-term holders, or entities retaining Bitcoins for upwards of 155 days, have surrendered their coins to exchanges at a loss. These moves echo Bitcoin's retreat from its two-year peak of $49,000 which occurred right after the launch of ETFs, where short-term holders led the selling spree, often offloading Bitcoins for less than what they initially paid.
While reflecting on the scale of these movements, James Van Straten - a research and data analyst at CryptoSlate - expressed caution, stating that the long-term holders might be standing at a precipice, with a more intense round of capitulation yet to come. "The situation ominously mirrors the pre-Luna collapse capitulation witnessed in May 2022", he warned.
Published At
1/25/2024 1:26:00 PM
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