- Window for spot BTC ETFs is barely a week out from opening, between January 5 and 10, ETF experts say.
- The market has cooled off ahead of 2024, with traders exercising caution evidenced by the dwindling trading volume.
- Concerns over a sell-the-news situation playing out post-expected approval continue to brew, reinvigorating investor caution.
Exchange-traded funds (ETFs) specialists with Bloomberg Intelligence James Seyffart and Eric Balchunas hold firm to their 90% odds of an approval coming between the January 5-10 window in 2024. In anticipation for this event, which is expected to bring billions of dollars into the crypto space, volatility soared in the market over the past months. However, as the calendar date closes in, speculation of a sell the news event has traders and investors on ‘safety-first’ mode, with trading volumes dwindling in the BTC market as attention turns to altcoins.
Also Read: Bitcoin ETF news and five most asked questions regarding spot ETF approval
Sell the news event after buying the rumor
Buy the rumor sell the news is a popular narrative in the crypto and trading scenes in general, and often proves accurate. It defines a contrarian trading strategy “predicated on anticipating market reactions to rumors and news announcements,” according to Liberated stock trader insights.
With investors looking to capitalize on price movements, they act before the masses widely distribute or spread and process the information. The action, which is essentially buying, pumps the asset’s price, putting them at a profit when they decide to sell on the news.
Towards the last half of 2023, the cryptocurrency market witnessed multiple price surges with Bitcoin (BTC) recording significant moves. This came on the back of rumors about the imminent approval of a spot Bitcoin ETF, which were subsequently delayed. Nevertheless, the pattern fueled anxiety among traders and investors.
The anticipation and potential approval has clearly resulted in buying enthusiasm, with markets turning bullish beginning around October 18. X user Credibull Crypto called this, “buy the rumor, buy the news event.”
Buy the rumor buy the news event
— CrediBULL Crypto (@CredibleCrypto) December 22, 2023
Nevertheless, there is also support for the possibility of a sell-off post-approval. This argument draws inspiration from the fact that ETFs must purchase BTC with cash, and there being no option to repurpose existing Bitcoin holdings.
Won't be sell the news:
— Cront (@CrontBTC) December 22, 2023
1) ETFs will be buy with cash only. They can't use existing BTC to put them into an ETF, they need to buy new ones
2) The first ETF with the most liquidity will win. They all want to win and get a lot of customers.
-> They will fomo in like retail imo
Possibility of a sell the news event in case of spot ETF approval
With expectation of intense competition among the prospective issuers to become the ETF with the most liquidity, there could present a situation where the filers expedite purchases, same case for retail investors, in a fear-of-missing-out (FOMO) situation.
With investors and traders in the market, the former buys and hodls while the latter trades short term using leverage through futures and options to play themes. ETFs are one such theme.
With this, January 5 to 10 or more accurately, the announcement day, is expected to be a liquidity event. This means many short-term traders will be looking to use it to exit in size. Considering many traders are leveraged, it should not come as a surprise if their size (exit liquidity) could be large short term, with the ensuing selling pressure pushing prices down as these short-term traders exit the market.
Nevertheless, with traders out, the market will be left with investors coming to ride the bullishness that the ETF promises. This is because of capital inflow into the market as the institutions buy BTC. Specifically, the institutions will have the freedom to capitalize on institutional money looking for exposure to BTC, which already provides counter-exposure to the continually debased US Dollar (USD).
As such, the possible approval news giving large firms the go-ahead to market Bitcoin ETFs would allow financial advisors to finally get their clients some exposure. With demand present, prices are bound to go up.
1/2 Why #btc ETF is sell the news?
— Marius Rupsys (@RupsysMarius) December 29, 2023
There are investors and traders.
Investors buy and hold. Traders trade short term.
Traders use leverage via futures and options to play themes, e.g. ETF.
Announcement day is liquidity event and many short term traders use it to exit in size.
Meanwhile, it is impossible to ignore the fact that pumpers have gone quiet of late, evidenced by the lull in the BTC market, so much so that Bitcoin price has been unable to overcome a weekly supply zone.
Where are the Spot BTC ETF pumpers gone ? Is a bit quiet lately !
— David (@patato_ass) December 29, 2023
The pump must continue!
Amid fears of the sell-the-news situation, attention has shifted to altcoins, with Ethereum taking the lead, possibly because of the assumption that when BTC ETF is confirmed, the ETH ETF will certainly follow.
Everyone’s worried about “sell the news” on #BTC ETF approval
— Kale Abe (@kale_abe) December 29, 2023
Dude, just buy #ETH and relax lol
You literally get all of the upside with none of the downside
When BTC ETF is confirmed it just means that ETH ETF is for sure COMING hence BULLISH
Not that hard
This explains the capital outflow from the Solana (SOL) market to the Ether market.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Is Altcoin Season here as Bitcoin reaches a new all-time high?
Bitcoin reaches a new all-time high of $98,384 on Thursday, with altcoins following the suit. Reports highlight that the recent surge in altcoins was fueled by the victory of crypto-friendly candidate Donal Trump in the US presidential election.
Shanghai court confirms legal recognition of crypto ownership
A Shanghai court has confirmed that owning digital assets, including Bitcoin, is legal under Chinese law. Judge Sun Jie of the Shanghai Songjiang People’s Court shared this opinion through the WeChat account of the Shanghai High People’s Court.
BTC hits an all-time high above $97,850, inches away from the $100K mark
Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Bitcoin: New high of $100K or correction to $78K?
Bitcoin surged to a new all-time high of $93,265 in the first half of the week, followed by a slight decline in the latter half. Reports highlight that Bitcoin’s current level is still not overvalued and could target levels above $100,000 in the coming weeks.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.