Article Rewrite:
The downward trend in the post-ETF era continues in the market.
From last night to this morning, the market continued its downward trend. According to the OKX market data from EY Okex, BTC has fallen below 40,000 USDT, currently reporting at 39,701.1 USDT, with a 24-hour decline of 4.4%. ETH is approaching 2,300 USDT, reaching a low of 2,302.01 USDT, with a 24-hour decline of 5.4%.
In addition to BTC and ETH, some altcoins that were previously performing strongly have also experienced significant pullbacks. As of now, SOL is reporting at 86.64 USDT, with a 24-hour decline of 7%; ARB is reporting at 1.69 USDT, with a 24-hour decline of 6.8%; OP is reporting at 3 USDT, with a 24-hour decline of 4.2%; TIA is reporting at 15.24 USDT, with a 24-hour decline of 9.1%.
Due to the overall market decline, the total market capitalization of cryptocurrencies has also significantly decreased. CoinGecko data shows that the current total market capitalization has shrunk to $1.63 trillion, a decrease of 4.3% in the past 24 hours. The enthusiasm of cryptocurrency traders has also visibly declined, with the fear and greed index reaching 70 today, dropping from the prolonged “greed” level to “neutral”.
In terms of derivatives trading, Coinglass data shows that there have been $252 million in liquidations in the past 24 hours, with the majority being long positions liquidated, totaling $217 million. In terms of specific cryptocurrencies, BTC liquidations amounted to $74.65 million, while ETH liquidations amounted to $64.87 million.
Reasons for the decline: Good news exhausted? Profit-taking? Grayscale selling?
Since the approval of the Bitcoin spot ETF on January 10th, the market has been in a continuous downward trend. Calculated based on the peak price of BTC after that date (high point of 48,988, low point of 39,757), the overall decline has approached 20%.
Various institutions and analysts have different opinions on the reasons for the market decline. Some voices believe that this is a foreseeable correction after the positive impact of the ETF has diminished. Chris Burniske, former head of crypto at Ark Invest and current partner at Placeholder VC, predicted on the day of the ETF approval, “The current situation easily reminds people of the hype surrounding Coinbase’s IPO, which raised expectations for the market at the time, but in retrospect, it was the highest point for BTC for several quarters.”
Analysts at bitBank also hold the same view. The institution predicted in an email to clients that the approval of the ETF could become a short-term top for BTC prices.
Market data from large traders also aligns with this prediction. Kaiko data shows that after the ETF approval, the selling pressure in the market mainly concentrated on Binance, OKX, and Upbit, indicating that the main reason for the price decline is the profit-taking by large long-position traders in response to the ETF market.
Kaiko’s tracked data shows that Binance’s spot market CVD turned positive last Thursday and has been declining since then, equivalent to a capital outflow of nearly 5,000 BTC. The capital net outflow from Korean exchange Upbit ranked second, followed by Itbit and OKX.
In terms of more tangible news, the ongoing selling behavior of Grayscale is currently the most discussed factor contributing to the decline.
Odaily’s Planet Daily article “Did Grayscale Sell-off Cause BTC to Drop After ETF Approval? How Much Selling Pressure is Ahead?” provides further details.
The positioning change of GBTC has opened up a channel for early investors to redeem their shares in the opposite direction. According to an analysis report compiled by Kiarash Hossainpour, the founder of Colorways Ventures and The Consensus, the BTC holdings of GBTC have decreased from 621,000 to slightly below 580,000 since the approval of the Bitcoin spot ETF, with outflows exceeding 40,000 BTC, equivalent to approximately $1.6 billion at the current price.
In addition, according to sources, FTX seems to be the main source of the recent GBTC sell-off, with the institution selling 22 million GBTC shares worth nearly $1 billion.
What is the future direction? Is there hope for a rebound?
Based on various predictions for the future trend, many analysts are not optimistic about the short-term market outlook.
Kiarash, in his report, predicts that there is still selling pressure of 281,045 BTC from GBTC, worth about $12 billion.
The team of JPMorgan analyst Nikolaos Panigirtzoglou also points out that if GBTC investors continue to take profits, Bitcoin prices may face further downward pressure in the coming weeks. However, Nikolaos is more optimistic than Kiarash, believing that the total outflow value of GBTC will be around $3 billion.
Arthur Hayes, co-founder of BitMEX, whose recent market predictions have been accurate, also expressed a bearish view on the future price of Bitcoin. He believes that Bitcoin will soon fall below the $40,000 mark (which has been proven today). As a result, Arthur has purchased put options expiring on March 29th with a strike price of $35,000.
Arthur also emphasized that the decline in Bitcoin prices may continue until the release of the U.S. Treasury’s quarterly refinancing announcement on January 31st.
However, while collectively bearish on the short-term market, many analysts hold a positive outlook for the longer-term market trend.
Insiders at FTX stated that the institution has cleared its GBTC holdings, and since it has been a major force in the GBTC sell-off, it is expected that the selling pressure in the market will ease in the near future.
Michael Novogratz, CEO of Galaxy Digital, also stated that Bitcoin prices may “rise within six months”. Michael explains that only 30% of the outflow from GBTC has been redirected to other ETFs, and as this percentage increases, the current market anxiety will gradually dissipate, pushing Bitcoin to higher prices within six months.
Matt Hougan, Chief Investment Officer of Bitwise, succinctly summarizes the current market situation: “People overestimated the short-term effects of Bitcoin spot ETFs but underestimated the long-term impact of ETFs.”
In conclusion, you may be disappointed with the market trend after the ETF approval, but considering the change in market sentiment, this scenario is not entirely unexpected. The approval of the ETF is undoubtedly positive, but the buying effect will not immediately manifest and will require time to accumulate gradually.
In the past week, even in the midst of the GBTC turmoil, we have seen a net inflow in the ETF market. While the former reaches its limit, the latter is just beginning. This ebb and flow will eventually lead to a change in market sentiment.
