Bitcoin Price Targets: Bearish Sentiment Rises After ETF Dip
Bitcoin experienced a volatile start to the year, with the debut of the first spot Bitcoin exchange-traded funds (ETFs) in the United States causing snap moves both up and down. After reaching $49,000 on ETF launch day, BTC/USD quickly dropped and is now approaching $43,000. Some traders believe that the dip is a healthy support retest, while others see the preceding local top as remaining unchanged for a long time. Speculative traders may be exhausting themselves, as they offloaded billions of dollars in BTC at a loss last week.
Speculators Panic Sell as Bitcoin Drops $5 Billion in a Day
The retracement from $49,000 caught many bulls by surprise, resulting in panic selling. According to data from CoinGlass, around $112 million in BTC longs were liquidated on January 12, making it one of the costliest days in recent months. The majority of the panic selling came from short-term holders (STHs), while long-term holders (LTHs) barely reacted to the events. This suggests that the ETF announcement prompted speculative buying, while long-term holders remained confident in the market.
Markets Brace for Fed Rate Cuts Despite CPI Overshoot
Despite the recent volatility caused by the ETF launch, U.S. data prints are expected to cool in the coming days, providing a break from volatility. The Consumer Price Index (CPI) numbers released last week showed prices climbing in December 2023 by more than expected. Although the markets do not believe that the Fed will lower rates this month, they anticipate rate cuts in quick succession from March onward. These rate cuts are seen as a positive for risk assets, including cryptocurrencies.
Bitcoin Miners Face Rising Difficulty Despite ETF Volatility
Bitcoin mining difficulty is slated to increase by 0.35% this week, despite the recent ETF volatility. Miners have weathered the storm and continue to compete for block subsidies, with the block subsidy halving event scheduled for April. Until then, fees remain elevated, and the hash rate continues to hover around all-time highs seen over Christmas. The upcoming block subsidy halving event will cut the amount earned per mined block by 50%, which could have an impact on miners moving forward.
Ethereum Market Warning: Open Interest Reaches $1.35 Billion
While Bitcoin suffered after the ETF launch, Ethereum (ETH) saw gains, reaching its highest levels since mid-2022. However, there are concerns about the growing open interest in Ethereum futures, which currently stands at $1.35 billion. This indicates that speculative bets on Ethereum may become too much to handle. Additionally, open interest has shifted away from Bitcoin toward Ethereum, leading to CME Group Bitcoin futures being in “backwardation” (below spot price). Some analysts believe this could be a buy signal for Bitcoin.
Analyst comment
1) Bitcoin Price Targets: Bearish Sentiment Rises After ETF Dip
– Negative news
– The market is likely to continue to be bearish as traders believe the recent dip is a sign of a prolonged downturn.
2) Speculators Panic Sell as Bitcoin Drops $5 Billion in a Day
– Negative news
– The market may experience further selling pressure as panic selling from short-term holders continues.
3) Markets Brace for Fed Rate Cuts Despite CPI Overshoot
– Positive news
– The market is expected to stabilize as data prints cool and rate cuts are anticipated, which is seen as positive for risk assets, including cryptocurrencies.
4) Bitcoin Miners Face Rising Difficulty Despite ETF Volatility
– Neutral news
– The market for Bitcoin mining is expected to continue as miners compete for block subsidies, although the upcoming block subsidy halving event could impact miners in the future.
5) Ethereum Market Warning: Open Interest Reaches $1.35 Billion
– Negative news
– There are concerns about the growing open interest in Ethereum futures, indicating speculative bets may become overwhelming. However, some analysts see this as a potential buy signal for Bitcoin.
