Bitcoin (BTC) has fallen over 7% to $41,600 since the approval of the US’s first spot Bitcoin ETFs on January 10 and their trading commencement on January 11. Analysts at 10x Research indicated that this decline is the result of the classic investment strategy of “buy the rumor, sell the news.” The analysts, led by Markus Thielen, warned that the sell-off could continue in the short term and potentially test the support level at $38,000.
Bitcoin Declines After the Launch of First Spot Bitcoin ETF
The drop in Bitcoin came on the heels of high expectations for significant capital inflows following the approval of 11 spot ETFs in the US. Bitcoin initially rose to $49,000 as a result of breaking out of a triangular formation on the price chart, only to pull back sharply afterward. 10x Research had pointed out this triangular formation in an investor note dated December 29, predicting a potential movement of +/- 10% in either direction. The market is now facing a pullback after experiencing a rally.
The technical analysis presented by 10x Research is based on the downward trend indicated by Bitcoin’s Relative Strength Index (RSI). Currently, the trend in the RSI indicator, combined with a decline of over 5%, has increased concerns about a market correction. The fact that the Moving Average Convergence Divergence (MACD) indicator has dipped below zero also signals a loss of momentum in Bitcoin.
The report also highlights that significant pullbacks have occurred following major events such as the launch of Bitcoin futures in December 2017, the listing of Coinbase on the stock exchange in April 2021, and the Bitcoin ETF in October 2021, emphasizing historical precedents. The 10x Research analysts added that these historical patterns suggest the possibility of market fatigue.
Changes in Grayscale’s ETF GBTC Could Contribute to Downward Pressure
Thielen also mentioned that investors shifting from the older Grayscale Bitcoin Trust (GBTC), a spot Bitcoin ETF, to lower-fee ETFs could contribute to the downward pressure on Bitcoin’s price. While GBTC has a fund management fee of 1.5%, competitors like BlackRock offer ETFs with only a 0.25% fee. Thielen expects Grayscale’s decision to facilitate investors’ gradual transition from higher-fee options to others to impact Bitcoin’s price and exert downward pressure.
On the other hand, Thielen expressed concerns referencing negative news about Grayscale and its parent company Digital Currency Group (DCG), as well as GBTC’s history of charging a 2.0% fund management fee while trading at a 50% negative premium to net asset value at one point.
According to 10x Research analysts, investors may sell their BTC holdings before switching to a different ETF issuer, which could lead to increased concerns and a downward impact on Bitcoin.
