Cryptocurrencies have seen sizable declines since last Friday, with Bitcoin's correction from its highs near $49,000 amounting to more than 15%. However, the declines have been halted and the largest cryptocurrency is currently holding at $43,000, at a time when investors are paying $2,500 for Ethereum. The cryptocurrency market has been 'living' for months with the approval of ETF (ETP) applications at the SEC, and although there was no immediate 'selling the news' in the end the huge 'overhang' of profitable Bitcoin on the market started a wave of profit realization, the effects of which we are seeing.
What's next for Bitcoin?
- The debut of ETFs was mostly very successful in terms of trading volume, but it is uncertain whether institutions accumulating BTC through ETP products will adopt a passive strategy, further limiting supply
- Nonetheless, the SEC's approval seems positive and could potentially bring additional U.S. investor demand to the market that would not be there if the products were not available
- The liquidation of BTC by investors in the Grayscale Bitcoin Trust (GBTC), who were finally able to sell their reserves at market BTC prices after converting the fund to an ETF (ETP), was responsible for part of Bitcoin's decline. GBTC saw nearly $2.5 billion in Bitcoin sales volume, driven in part by high fees relative to other institutions' offerings
- On-chain data suggested a near-mania phase recently, with more than 95% of Bitcoin addresses recording a profit, historically coinciding with periods of corrections and short-term panics. The declines are therefore not entirely surprising, although it seems curious that they came only days after the SEC decision.
In the coming weeks, global sentiment and the dollar index may prove key for Bitcoin, which could shape at least temporary demand for the now closely watched by speculators, spot ETPs in the US. A stronger dollar and further postponement of policy cuts by the Fed are likely to indicate somewhat subdued institutional interest in Bitcoin, and perhaps add to the atmosphere of 'cooling sentiment' after the impressive rally.
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Looking at BITCOIN chart, we see that the range of the upward impulse within the market geometry has been preserved, but the SMA50 average (orange line) has been violated, which in previous such situations indicated a slightly longer period of weakness and potentially reaching lower price levels. In such a scenario, it is worth noting the level between $33,000 and $38,000 (SMA200 and SMA100), which is also near the average price of BTC held by 'short-term' addresses (this on-chain level has repeatedly provided a support during BTC corrections). On the other hand, if the market manages to maintain the current levels, further consolidation, a breakout above the SMA50 and the continuation of the uptrend is not excluded.
Source: xStation5
The U.S. dollar (USDIDX) is seeing a slight increase today. Analysts at Barclays pushed back the expected date of the first US rate cut from March to June, and a WSJ survey of economists indicated that 38% now expect a recession, compared to 49% surveyed in October 2023. We can see that the dollar index has been trading in an uptrend since the end of December, which could put broader pressure on risky assets, temporary reducing interest in Bitcoin ETFs if the Fed delays rate cuts.
Source: xStation5
ETHEREUM was driven by 'bullish' expectations of the acceptance of ETP products on ETH, at the SEC. Estimated final decisions on this aspect could come as early as the end of May, this year. Ethereum has given back a sizable portion of its gains, and a further decline towards the SMA200 (red line) and the 23.6 Fibonacci retracement of the October 2023 upward wave is still possible. The $2430 level is also worth watching in particular because of previous price reactions. If it is pierced, the next support is the levels around $2200, where we also see potentially stronger bullish activity (38.2 Fibo, levels from the December consolidation).
Source: xStation5
