Bitcoin Price Declines 6.8% Post-ETF Approval: Unpacking the Sell-Off

Bitcoin Price Declines 6.8% Post-ETF Approval: Unpacking the Sell-Off

Bitcoin faced a 6.8% decline between Jan. 11 and Jan. 12, following the approval of a spot Bitcoin exchange-traded fund (ETF). This article examines the sell-off phenomenon, delving into miner behavior, derivatives market trends, and overall market sentiment.

Factors Influencing the Price Correction:

The drop in Bitcoin price, occurring after a 75% rally leading up to the Jan. 11 ETF launch, has raised questions about investor sentiment. The fear of market makers and whales selling at a loss, potential pressure on miners due to the upcoming halving, and a surge in miners’ outflows to exchanges are considered contributing factors.

Miners’ Outflows and Historical Data:

As reported by Bitcoin News, miners’ outflow reached a six-year high, with $1 billion worth of BTC sent to exchanges. Historical data from CryptoQuant shows peaks in BTC transfers from miners coinciding with price bottoms in various periods, but the correlation remains speculative.

Derivatives Market Analysis:

Examining Bitcoin derivatives provides insights into market sentiment. Despite the price drop, aggregate futures open interest increased by 14%, indicating sustained investor interest in leverage positions. CME leads with a 30% market share in BTC contracts. The funding rate for BTC futures stabilized, suggesting balanced demand for leverage between longs and shorts.

Options Market and Sentiment:

The put-to-call ratio for Bitcoin options volume stood between 0.35 and 0.65 in the past week, reflecting lower demand for put options. This data suggests that investors are not overwhelmingly betting on a BTC price decline, contributing to a more balanced market sentiment.

Uncertainties Surrounding ETF Impact:

Part of the price dip on Jan. 12 may stem from uncertainties surrounding how spot Bitcoin ETFs work, including creation, redemption, and price formation. Traders, skeptical due to previous false ETF approval alerts and broker restrictions, may panic sell in the absence of clear information.

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