The CryptoQuant report particularly posits that this scenario could trigger a “selling the news” event, historically linked to market corrections.
A recent report from CryptoQuant has sparked discussions, suggesting that the approval of a Bitcoin spot exchange-traded fund (ETF) by the US Securities and Exchange Commission (SEC) could lead to a major event in the market. This possibility arises as the price of Bitcoin (BTC) stabilizes above $40,000, leaving many market participants with significant unrealized gains.
Bitcoin Possible Fall to $32,000
CryptoQuant analysis points to the current state of Bitcoin holders as a reason for the potential BTC price drop when the Bitcoin Spot ETF is approved, especially the short-term ones, which experience unrealized profit margins of around 30%.
According to CryptoQuant, such high profit levels have often preceded price drops. Additionally, the report notes an increase in selling activity from Bitcoin miners, increasing potential selling pressure on BTC. This, combined with the market’s anticipation of a timely approval of a Bitcoin ETF, could create a volatile environment, as highlighted in the report.
According to CryptoQuant analysis, during downturns within bull markets, the value of Bitcoin often falls back to the level where short-term investors have historically realized their prices. With this in mind, the report suggests that in a “sell the news” scenario, Bitcoin’s value could see a drop, with a possible drop to around “$32,000.”
Contrasting Views and Support Levels Amid ETF Speculation
The conversation about the possible approval of a Bitcoin spot ETF is not one-sided. Several analysts are predicting a positive outcome, with companies like Matrixport and prominent analysts like Michael van de Poppe suggesting that approval could catapult the price of Bitcoin to new highs.
On December 19, van de Poppe posted on X that “#Bitcoin did test the lows, didn’t take the liquidity beneath the lows. Anyway, correction seems over and pre-ETF we’re likely to test $47-50K. Buy the dips.”
Matrixport anticipates that the approval of Bitcoin spot ETFs by the US SEC could push the value of BTC to around $50,000 by early 2024. Van de Poppe echoes this sentiment and foresees a potential increase to the $47,000 to $50,000 range.
Furthermore, although CryptoQuant predicts a possible drop to $32,000, other analysts’ prediction of the BTC bottom does not go that low. Analyst Ali, for example, has highlighted a solid support zone between $37,150 and $38,360, further suggesting to “watch out for two resistance walls that could keep the #BTC uptrend at bay: one at $43,850 and another at $46,400.”
This range is bolstered by the activities of approximately 1.52 million addresses containing around 534,000 BTC. Notably, such a strong support base could mitigate the risks of a drastic price decline even if a “sell the news” event was to occur after the ETF’s spot approval.
“Buy with Rumor and Sell with the News” Effect
This phenomenon of buying on rumor and selling on news is neither new nor exclusive to Bitcoin. It has been observed in other financial markets, such as stocks, currencies or raw materials.
The approval of a Bitcoin ETF is one of the most anticipated and desired events by the crypto community, as it is considered to drive the adoption and price of Bitcoin to levels never seen before. It is unknown how the ETF will be approved, nor what impact will it have on the market.
By Audy Castaneda
