The cryptocurrency market is eagerly awaiting the decision on Bitcoin spot ETFs, which is scheduled to take place between January 8th and 10th. This decision is expected to have a significant impact on market behavior, with speculation and expectations driving market movement.
According to K33 Research’s senior analyst, Vetle Lunde, the approval of Bitcoin spot ETFs could trigger a news sell-off phenomenon. Lunde explains that many short-term market participants view this event as an opportunity for profit-taking, which could lead to a self-fulfilling prophecy. He estimates that there is a 75% chance of a news sell-off event occurring, while the probability of ETF approval and significant inflows that could counteract selling pressure is only 20%. There is also a small possibility, around 5%, that ETFs will be denied.
Lunde also points out a “crowded commerce” situation in the market, with an increase in futures premiums on the Chicago Mercantile Exchange. This indicates that institutional participants are expecting approval and are increasing their long exposure. Open interest has also grown significantly, possibly influenced by the expectation of Bitcoin spot ETF approval.
In the retail market, funding rates on offshore exchanges have reached extremes, with a 72% annualized increase. Short positions are reluctant to enter the market with the ETF verdict approaching, leading to higher perp premiums for the spot market and expensive long positions. This suggests that aggressive long leverage could lead to significant adjustments following the ETF decision.
Lunde believes that Bitcoin spot ETFs will be pioneers in the market, but their impact will depend on the flows after their launch. He emphasizes the need for a net inflow of new money, estimating a minimum of 50,000 BTC (approximately $2.3 billion) in January.
As of now, the BTC price is quoted at US$45,163.76, showing a 5% increase in the last 24 hours.
The saying “Buy on the rumor, sell on the news” is relevant in this situation. It describes a common trading strategy where investors act based on anticipations and expectations rather than concrete events. “Buy on Rumor” refers to buying assets when there are rumors or expectations of a positive event that could increase their value. For example, in the context of Bitcoin spot ETFs, investors may start buying Bitcoin early if there are rumors of approval, hoping for a price increase. On the other hand, “Sell on the news” refers to selling assets after the expected event happens and becomes news. Investors do this because they believe the impact of the news is already reflected in the current price, and they want to take profits before the price potentially falls.
It is important to note that this strategy carries risks and is based on rumors and expectations that may not come true. The market’s reaction to news can also be unpredictable and may not always follow this strategy.
Disclaimer: The views and opinions expressed in this article are for informational purposes only and do not constitute financial, investment, or other advice. Investing or trading cryptocurrencies carries the risk of financial loss.