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Bitcoin ETF Approval Could Be a “Sell The News” Event: CryptoQuant
Bitcoin (BTC) it is expected to correct to $32,000 next month following the potential approval of a spot ETF, according to data provider CryptoQuant.
In what is being described as a potential “news sell” event, CryptoQuant said in a note to CoinDesk that traders’ unrealized profits are currently persisting at a level that historically precedes a correction.
“Sell the news” is a well-known term in capital markets, describing how asset prices, leverage and sentiment rise in the run-up to a bullish event only to cause prices to plummet shortly thereafter.
This is because astute traders capitalize on long, overcrowded trades, trapping those with leverage and forcing them to close or be liquidated when the price goes against them.
An ETF being approved is perceived as a bullish event as it will open up inflows into bitcoin from institutions, thus creating constant buying pressure.
“Short-term Bitcoin holders are experiencing high unrealized profit margins of 30% that have historically preceded price corrections (red circles),” CryptoQuant wrote in the note. “Furthermore, short-term Bitcoin holders continue to spend Bitcoin profitably, while rallies usually come after short-term losses have been realized.”
CryptoQuant added that the price of bitcoin could drop to as low as $32,000, which is the price realized by the short-term holder.
Capriole Investments said “conservative portfolio management” makes sense ahead of the potential approval of a spot ETF.
“With Bitcoin up more than 60% since the ETF craze began a few months ago, and with every man and his dog on X.com expecting an approval around January 10, we need to start anticipating events of much larger volatilities (up/down) in this region the risk today is substantially higher for long Bitcoin positions than a few weeks ago,” Capriole wrote in a blog post.
In Bitcoin’s history, “sell the news” events are common, in 2017 BTC reached $20,000 after BTC futures were listed on the CME, and in 2021 the world’s largest cryptocurrency peaked again, hitting the $65,000 after Coinbase completed its IPO before losing ground in the following months.
Bitcoin is currently trading at $42,450 after starting the year at $16,000. Daily trading volume reportedly remains stable at $80 billion CoinMarketCap.