Bitcoin Spot ETF Approval: Price Decline Insights

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On January 10th, Bitcoin [BTC] witnessed the approval of eleven spot ETF applications, with trading commencing the following day. Initial expectations varied among investors, with some anticipating a surge in prices, while others contended that the event had already been factored into the market.

The latter perspective proved accurate, particularly in the short term. BTC prices experienced an ascent to $48.9k on Binance on January 11th, only to plummet to $41.5k a day later.

Ki Young Ju, the founder and CEO of CryptoQuant, shared on social media that Grayscale had transferred 21.4k BTC to multiple addresses over the past 30 days. While this outflow wasn’t identified as the sole cause of the price dip, it certainly played a contributing role.

Exploring the Coinbase Premium Gap

Delving into the implications of this BTC outflow, Maarten, also sharing insights on social media, highlighted the negative trend in the Coinbase Premium Gap after the initiation of spot ETF trading. The Premium represents the price difference between Coinbase’s BTC/USD pair and Binance’s BTC/USDT pair. Positive values indicate strong demand from U.S. investors, whereas negative values suggest selling activities among U.S. participants.

Throughout December and January, the Premium had consistently been positive, signaling robust demand. However, after the commencement of spot ETF trading, it turned negative, indicating a shift in sentiment and a potential increase in selling pressure from U.S. participants.

Maarten also observed a surge in trading volume on Coinbase during American trading hours. Coupled with the declining Premium, he suggested potential bearish signals for Bitcoin bulls on the upcoming trading day, January 16th.

Will the price decline persist into the next week?

AZC News delved into the liquidation heatmap of Bitcoin to gain insights into potential price movements. Recognizing the significance of liquidity in market dynamics, high liquidity pockets become crucial indicators for potential trend reversals.

The liquidity pool in the $48k-$48.2k range underwent testing, with BTC experiencing a sharp reversal near $49k on January 11th. Moving north, levels at $50.2k, $51.2k, and $52.4k emerged as noteworthy areas of interest.

Examining the lower end of the chart, the $39.2k-$40k region revealed a denser concentration of significant liquidation levels. Further down, the $35k and $33.8k levels were identified with even more substantial liquidation levels. This implies that in the coming weeks or months, a reversal to these levels could likely mark a local market bottom.

As of the current scenario, BTC appears more inclined to decline in search of liquidity rather than ascend beyond the $50k mark.