Bitcoin ETF Approval: A Predicted 'Sell The News' Event - CryptoQuant Analysis

• Bitcoin (BTC) May Fall to $32,000 After Spot ETF Approval
• The Sell the News Phenomenon
• Effects of an ETF Approval
• Investor Caution Ahead of ETF Approval
• Sell the News in Bitcoin's History

Bitcoin (BTC) May Fall to $32,000 After Spot ETF Approval

Bitcoin$42,260 -0.64% (BTC) may see a correction down to $32,000 in the coming month, following a potential approval of a spot ETF. This projection comes from data provider CryptoQuant, who points to current traders' unrealized profits being at a level that has historically signaled a correction.

The Sell the News Phenomenon

The anticipated correction is seen as a possible sell the news event. This term is common in capital markets and refers to the trend where asset prices, leverage, and sentiment rise in anticipation of a bullish event, only to dip shortly after. This occurs as savvy traders leverage the over-crowded long trade, trapping those with leverage and causing them to close or get liquidated as the price moves against them.

Effects of an ETF Approval

An approved ETF is generally seen as a positive event as it attracts bitcoin inflows from institutions, thus continuously applying buying pressure. CryptoQuant pointed out that, Short term Bitcoin holders are experiencing high unrealized profit margins of 30%, which historically has preceded price corrections. They also noted that short-term holders are currently spending Bitcoin profitably, even though rallies typically follow short-term losses. CryptoQuant suggests that the Bitcoin price could drop to as low as $32,000, a figure matching the short-term holder realized price.

Investor Caution Ahead of ETF Approval

Capriole Investments indicates that conservative portfolio management is a prudent strategy in the lead up to the potential spot ETF approval. They stated, With Bitcoin up over 60% since ETF mania began a few months ago, and much anticipation for an approval on or around 10 January, we must brace ourselves for larger volatility (up/down) in this area. The risk today for long Bitcoin positions is substantially higher than it was just a few weeks ago.

Sell the News in Bitcoin's History

Bitcoin's history has its share of sell the news events. In 2017, BTC reached its peak at $20,000 after the CME listed BTC futures. In 2021, the world's largest cryptocurrency once again peaked, reaching $65,000 after Coinbase completed its IPO, only to lose its footing in the subsequent months. As it stands, Bitcoin is currently trading at $42,450, having started the year at $16,000. CoinMarketCap reports that the daily trading volume remains steady at $80 billion.

Edited by Jonathan Stoker