The long-awaited Bitcoin Spot ETFs have been approved, now comes the disappointment?

Thought of the week

The Bitcoin Spot ETFs will provide fresh capital in the markets (Bitcoin ) in the long term and this will flow into the market week after week and not be discharged in individual events as was often the case in the past, which often led to strong volatility and major upswings and downswings. Bitcoin could now become more tangible for non-professional market participants.

Digital Asset News

The correlation between bitcoin and gold has rebounded in 2023, according to a recent report by asset manager Fidelity.

Fidelity’s analysis shows that the Bitcoin price has decoupled from its previously inverse relationship with the benchmark interest rate and has even recovered despite rising interest rates worldwide, which normally leads to a decline in demand for risk assets. Over the past twelve months, the gold price has followed the same pattern:

“But last year saw a complete decoupling of this relationship as real interest rates continued to rise (inflation eased and government bond yields rose faster than at any time in history), while Bitcoin not only remained stable, but actually rose! Could this be due to an idiosyncratic event, such as the anticipation of a spot ETP? Possibly. But we don’t think so, because gold has also behaved similarly recently.”

In 2023, the gold price was subject to significant fluctuations, but overall showed a strong performance against several currencies. The gold price in US dollars rose by 14.6% in 2023, with significant differences between the various currency pairs. The performance was primarily determined by geopolitical risks and demand from central banks.

According to Eric Balchunas, ETF analyst at Bloomberg, the newly launched spot Bitcoin index funds recorded inflows totalling USD 1.4 billion in the first two days of trading.

According to Bloomberg, a total of 500,000 trades were made with the funds, which corresponds to a volume of USD 3.6 billion. The trading volume takes into account both outflows and inflows from/to the funds. However, Balchunas also pointed out that the figures could be corrected due to transactions that have not yet been included.

The data shows that Grayscale’s ETF, the Grayscale Bitcoin Trust (GBTC), recorded outflows totalling USD 579 million during this period. After deducting outflows from GBTC, net inflows across all Bitcoin investment products totalled USD 819 million. The initial activity is in line with previous forecasts by ETF analyst James Seyffart, who believes that Bitcoin ETFs could attract around USD 10bn in the first year.

The GBTC outflows could be due to investors in the Grayscale mutual fund now converting their shares following the SEC’s decision to allow it to be converted into an ETF. This could be one of the reasons why Bitcoin faced major corrections after the Bitcoin Spot ETFs were confirmed.

BlackRock CEO Larry Fink doubts the practicality of using Bitcoin for everyday transactions and reiterates that the market-leading cryptocurrency should be viewed purely as an asset class.

In an interview with CNBC on 11 January, Fink began by emphasising his belief in Bitcoin, viewing the crypto market leader as an alternative form of wealth storage rather than a contender to replace national currencies.

“I don’t think it [Bitcoin] will ever be a currency. I think it’s an asset class.”

Instead, Fink believes central bank digital currencies (CBDCs) will come to fruition in the near future.

“I think we will create digital currencies, we will use the technology to do it. We will use a blockchain,” as the influential financier explains.

According to recent data from Cointelegraph, over 100 countries are now exploring the development of CBDCs, while 39 countries have either launched a pilot project, a proof-of-concept or a CBDC.

Digital Asset Market

The majority of digital assets experienced a “rollercoaster ride” in terms of price performance last week. While positive sentiment and rising prices prevailed in the first half of the week due to the imminent SEC confirmation, these levels were only maintained and extended for a short time after the official approval, before Bitcoin in particular experienced major price setbacks and fell significantly.

In retrospect, this event was a temporary “buy the rumours, sell the news” event, a phenomenon in which certain actions are already priced in and ultimately lead to profit-taking.

Fundamentally and in the long term, these new financial products are another important milestone for Bitcoin and the entire digital asset sector. Nevertheless, capital inflows were surprisingly low in the first few days, which is why there is a certain gloom among market participants and this is leading to further sell-offs. In the long term, these ETFs will bring fresh capital into the market and promote the scarcity of Bitcoin, which should result in a predictable development with lower volatility.

On a weekly basis, the overall market is once again up ~-4%.

The message for the coming week is: if Bitcoin stabilises and starts to gain momentum, altcoins could take on a greater role and strongly outperform Bitcoin!

From a technical point of view, Bitcoin is now trading around the support zone of ~$42,000 and has thus clearly bid farewell to the high for the year of just under $50,000. This also illustrates the significant setback that has occurred since Thursday evening!

The next price targets in the event of a positive development: ~$43,850, ~$45,250, ~$46,700

The next price targets in case of negative development: ~$41,500, ~$40,600 ~$39,500

The “Bitcoin ETF” catalyst is now exhausted. This means that market participants must now either buy worthwhile local dips through swing trades or focus on altcoins, as the pent-up volume that has been held in Bitcoin in recent weeks will now slowly flow into them! Large volume changes in altcoins could be a good indicator for an entry.

Weekly overview

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