This Week’s Market Observation: Bitcoin ETF Approved, How Much Further Will it Fall?
Last week, it was mentioned that there was a high probability of a market downturn due to the meme frenzy, coupled with the launch of the Bitcoin spot ETF. This week, it has been confirmed that this speculation was true, with Bitcoin falling 6.6% in the past 7 days, and Ethereum dropping 12.5%.
The phenomenon of “Sell The News” is very common in the capital market. It describes the rise in asset prices, leverage, and market sentiment before a bullish event, but prices often plummet rapidly after the event.
As for the main cause of the downturn, the market has attributed it to the redemption sell-off by Grayscale’s GBTC.
Grayscale’s GBTC business was launched in 2013, which means that investors’ Bitcoin has been trapped in Grayscale for over 10 years without the ability to redeem. With a large accumulation of Bitcoin and the recent market recovery, the negative premium has gradually been eliminated. At this point, it is only natural for investors to choose to redeem GBTC for profits.
As shown in the chart below, Grayscale has been experiencing a net outflow of approximately $500-600 million per day. In less than 10 days since its launch, a total of $4.3 billion has flowed out. It is the only fund among the 11 BTC ETFs that has experienced a net outflow. However, there has been a recent slowdown, with $428 million flowing out on January 24th.
Personally, I believe that the impact of Grayscale’s sell-off is diminishing over time. As mentioned earlier, the outflow of GBTC has slowed down. While it is true that Grayscale has been selling off, the other BTC ETFs have seen net inflows, and the overall inflow of the 11 ETFs is greater than the outflow. So, is the market really falling because of Grayscale’s sell-off? This remains to be debated.
According to the well-known media outlet Coindesk, FTX is also an investor in GBTC, and the bankruptcy restructuring team has already sold nearly 22 million shares of GBTC (about $1 billion). With zero holdings of GBTC, it is expected to alleviate the selling pressure.
However, there are still potential bearish factors in the market. GBTC is expected to continue to experience outflows. The question is whether the inflow of funds into the other 10 ETFs can support the selling pressure. This will be the focus in the coming months. It is expected that Mt.GOX will release 200,000 Bitcoins to the original holders.
In December 2023, Mt.Gox’s creditors received compensation via PayPal in Japanese yen. Most of the Mt.Gox creditors purchased Bitcoin at a price lower than $1,000.
Between November 2020 and 2022, the US government seized a total of 207,189 Bitcoins in three operations, including those related to the dark web market, hacker Jimmy Zhong, and the hacking of the cryptocurrency exchange Bitfinex. They have announced plans to sell these illicit Bitcoins in four phases.
Recap of Key News in the Industry This Week:
CME Fed Watch: The probability of the Fed maintaining interest rates in February within the range of 5.25%-5.50% is 97.9%, with a 2.1% probability of a 25 basis point rate cut. The probability of maintaining interest rates in March is 52.9%, with a cumulative probability of a 25 basis point rate cut at 46.2% and a cumulative probability of a 50 basis point rate cut at 1.0%.
Ethereum Foundation: If Sepolia and Holesky upgrade successfully, the Cancun upgrade will be deployed on the Ethereum mainnet. The Ethereum Foundation stated that Sepolia and Holesky will be upgraded within the next two weeks. Dencun will be launched on Sepolia at epoch 132608 (January 31, 6:51) and on Holesky at epoch 29696 (February 7, 19:35). Once the test network successfully operates the upgrade, the Cancun upgrade will be deployed on the Ethereum mainnet according to plan.
EigenLayer Postpones the Open Staking Window to February 6th-10th and Removes the Personal Cap for all LST. EigenLayer, the Ethereum staking protocol, announced that it will introduce three new LSTs in the EigenLayer staking ecosystem: sfrxETH, mETH, and LsETH. It will also remove the personal cap of 200,000 ETH for LST.
Opinions expressed in this article represent diverse viewpoints and do not represent the stance of “WEB3+.”
Proofreading Editor: Gao Jingyuan