Bitcoin faces a test ahead of the Bitcoin ETF launch, with potential for profit-taking once the ETF is approved, says analysts.
Key Takeaways
- Bitcoin is currently consolidating around $34,500 after hitting a 2023 high of $35,000 earlier this week.
- The surge in Bitcoin’s value is driven by anticipation of the approval of the first US exchange-traded funds (ETFs) investing directly in the cryptocurrency.
- Analysts are questioning whether the approval of the ETFs will trigger profit-taking and a potential “sell-the-news” event.
- Bitcoin’s recent outperformance of US equities and its deviation from traditional risk-on assets are notable trends.
- Technical indicators, such as Fibonacci ratios and the weekly RSI, suggest potential challenges for Bitcoin’s continued rally.
Bitcoin, having recently reached a 2023 high of $35,000, is currently undergoing a period of consolidation around the $34,500 mark. This surge in price is largely attributed to the growing expectation that the first US exchange-traded funds (ETFs) directly investing in Bitcoin will soon receive regulatory approval.
Sell The News?
One pressing question in the crypto community is whether the approval of these ETFs will lead to a “sell-the-news” event, prompting investors to take profits after the anticipation-driven rally. Hayden Hughes, co-founder of social-trading platform Alpha Impact, expressed his expectations, stating, “Markets have priced in a Bitcoin spot ETF approval, and I expect a sell-the-news event if it’s approved.”
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— ETHNews (@ETHNews_com) October 26, 2023
In contrast to Bitcoin’s bullish run, global stock markets are facing challenges, driven by rising long-term Treasury yields and deepening geopolitical uncertainties. Despite these macroeconomic conditions, Bitcoin and the broader crypto market have been able to maintain their bullish momentum, diverging from traditional risk-on assets like US equities.
However, it remains to be seen how long Bitcoin can continue to outperform US equities in this environment. Technical indicators also raise some concerns. Fibonacci ratios highlight a potential resistance zone just below the $36,000 level, marked by the 38.2% Fibonacci retracement of Bitcoin’s year-long decline until November 2022.
Moreover, the weekly relative-strength index (RSI) for Bitcoin recently crossed the 70 level for the first time since 2021, suggesting an “overbought” condition. Such high RSI readings historically indicate a reduced likelihood of rapid rallies like the recent 10% intraday surges.
On a derivatives front, data from Deribit, the largest cryptocurrency options exchange, reveals a notable accumulation of bullish wagers on Bitcoin reaching $40,000 by the year’s end, representing a 16% increase from current price levels.
Interestingly, Bitcoin’s recent rally seems to be diverting attention away from gold. Bloomberg’s Senior Macro Strategist, Mike McGlone, suggests that Bitcoin’s growing prominence, especially with the forthcoming approval of US spot Bitcoin ETFs, may erode gold’s relative standing as a traditional store of value.
To Conclude
As the crypto market eagerly awaits the approval of Bitcoin ETFs, the potential “sell-the-news” scenario raises questions about Bitcoin’s short-term price trajectory. Bitcoin’s ability to outperform traditional assets like US equities is a testament to its resilience in the face of market volatility.
Technical indicators hint at potential challenges, but bullish sentiment remains strong, with investors betting on further price gains. The evolving dynamics between Bitcoin and gold underscore the cryptocurrency’s growing influence in the financial world.
In the coming days, all eyes will be on the regulatory decision regarding Bitcoin ETFs, as it could have a significant impact on the cryptocurrency’s market dynamics.
