Bitcoin Faces Possible $32000 Downturn Amid Spot ETF Approval Risks

Bitcoin Faces Possible $32000 Downturn Amid Spot ETF Approval Risks

Asif Iqbal | December 30, 2023 | 10:50 AM IST | Breaking News | Follow on Google News

Bitcoin Faces Possible $32000 Downturn Amid Spot ETF Approval Risks.image/reauters

Bitcoin Faces Possible $32000 Downturn Amid Spot ETF Approval Risks

Bitcoin may undergo a potential downturn to $32,000 in the coming month if a spot exchange-traded fund (ETF) gains approval, triggering a ‘sell the news’ scenario, according to warnings from data provider CryptoQuant. The “sell the news” phenomenon is a common occurrence in capital markets, where asset prices, leverage, and sentiment increase ahead of a positive event but subsequently drop afterward. This is typically driven by savvy traders exploiting crowded long positions, compelling leveraged traders to exit or face liquidation as the market turns against them.

While the approval of a spot ETF is generally viewed as a positive development for Bitcoin, as it would attract more institutional investors and stimulate demand, CryptoQuant cautions that historical patterns indicate it could also lead to a corrective price movement. Short-term Bitcoin holders are currently holding unrealized profit margins of around 30%, a condition that has historically foreshadowed corrections, as noted by CryptoQuant in communication with CoinDesk. Additionally, short-term holders are still selling Bitcoin at a profit, contrasting with the usual trend where rallies follow the realization of short-term losses.

CryptoQuant estimates a potential price decline to $32,000, representing the realized price of short-term holders, indicating the average price at which they bought or sold Bitcoin. Another firm, Capriole Investments, suggests adopting a “conservative portfolio management” approach before the potential approval of a spot ETF. Capriole emphasizes the increased risk of holding Bitcoin compared to a few weeks ago, given the significant price surge of over 60% since the onset of ETF speculation.

Drawing parallels to historical events, Bitcoin experienced similar ‘sell the news’ situations in 2017 and 2021. In 2017, Bitcoin reached $20,000 after the launch of BTC futures on the CME but subsequently faced a decline. Similarly, in 2021, Bitcoin hit $65,000 following Coinbase’s public debut but later lost value in the subsequent months.

As of the moment, Bitcoin is trading at $42,450, having started the year at $16,000. The daily trading volume remains stable at $80 billion, according to CoinMarketCap. Investors are advised to remain vigilant and consider potential market volatility, especially in the context of a potential spot ETF approval.

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Asif Iqbal

Asif Iqbal is a seasoned news writer with a passion for delivering the latest updates to the public. Currently serving as the senior writer at VoM News, a prominent news outlet known for its comprehensive coverage of diverse topics, Asif has established himself as a reliable source of information. With a keen eye for detail and a knack for storytelling, he consistently provides readers with well-crafted articles that cover a wide range of news categories. His dedication to journalistic integrity and his commitment to staying ahead of the news curve make him an invaluable asset to Vom News, ensuring that readers are always well-informed on the issues that matter most. You can find his work and stay updated on current events by visiting vomnews.in.