Bitcoin posted a sudden retreat over the past week, erasing the gains it had garnered following the approval of a spot exchange-traded fund [ETF]. The flagship cryptocurrency saw a nearly 20% decline in value within just a fortnight. This decline, coupled with unforeseen outflows from the world’s largest Bitcoin ETF, has fueled speculation of a potential dip in BTC’s price to $38,000 before the upcoming halving event.
Adding to the market’s volatility, trading volume plummeted by more than half recently, and liquidations, both long and short positions, amounted to a substantial $2.54 million, underscoring the fragile equilibrium in the market. While opinions diverge on the reasons behind the recent BTC slump, Ki Young Ju, CEO and founder of CryptoQuant, advocates for accumulating Bitcoin akin to institutional investors.
He contends that BTC’s decline is attributed to derivative market selling rather than Grayscale’s Bitcoin Trust [GBTC]. According to Ju, the completion of re-accumulation will occur when on-chain over-the-counter [OTC] and spot ETF activities diminish, marking the initiation of a bull market.
Contrary to popular opinion, Ju emphasizes that the dominant cryptocurrency is in a futures-driven market and thus less susceptible to spot selling pressure from GBTC issues. He anticipates that the entrance of Traditional Finance [TradFi] into the market will expedite the next bull run, making it swifter and more spectacular than previous ones. Referring to another analyst’s forecast, Ju notes that the maximum drawdown might be around 30%.
Grayscale’s Bitcoin Outflows Stabilized But Still Substantial
Earlier, FTX’s bankruptcy estate executed a significant sell-off, offloading nearly $1 billion worth of Grayscale’s Bitcoin ETF. The transformation of GBTC into an ETF triggered substantial investor withdrawals, with over $2 billion leaving the platform, a notable portion of which was attributed to FTX’s estate liquidating 22 million shares.
Despite concerns surrounding GBTC outflows, recent data shows a diminished outflow of ‘only’ $425 million, the lowest since the inception of these outflows, suggesting a potential shift in sentiment. However, the substantial figure underscores the enduring impact, prompting close monitoring of this trend for broader insights into the market.
This number confirms the futility of looking at wallets all day as some kind of predictor of flows. Those had wildly higher numbers today. If anything, it’s volume that has become the best predictor, low volume = less bad outflows.