Bitcoin Faces Potential Correction in ETF Approval Anticipation

On-chain analytics platform CryptoQuant is issuing a warning as the cryptocurrency world waits for possible approval for spot-based Bitcoin exchange-traded funds (ETFs) this month. The platform indicates in a recent research study that the much-anticipated clearance might lead to a correction in Bitcoin, so transforming the much-anticipated event into a “sell-the-news” situation.

Right now, market analysts are putting a high probability—90%, to be exact—on the USA approving Bitcoin spot ETFs between January 8 and January 10, 2024. But CryptoQuant draws attention to a critical component of this confidence. The site notes that those involved in the Bitcoin market are sitting on large unrealized profits right now, which might lead to a sell-off if the news is confirmed.

Profit-Taking Potential and Market Dynamics

The market’s attitude has been greatly influenced by the expected approval of Bitcoin ETFs, as many people had anticipated that this would increase the value of the cryptocurrency. CryptoQuant, however, cautions that things could not go as planned in the post-approval scenario. Alternatively, traders may use the approval event to lock in their gains, which would cause Bitcoin to take a correction.

After the U.S. Securities and Exchange Commission (SEC) approved BTC ETFs, CryptoQuant presents an interesting statistic to measure the possible impact in the case of a drop. According to the site, there is a chance that Bitcoin would drop from its current prices by around 30%, perhaps reaching $32,000.

The statistic under consideration is the realized price of Short-Term Holders (STHs), which is an on-chain indicator that tracks the average purchase price of all Bitcoins that have not changed in less than 155 days. A retreat toward the STH realized price of $32,000, per CryptoQuant, may wipe out a sizable chunk of the gains gained by investors who entered the market in the previous five months.

The market is still a flurry of excitement at the approval of a Bitcoin ETF, but the findings from CryptoQuant highlight how crucial it is to take possible post-approval market dynamics into account. The platform’s research presents a cautious viewpoint, highlighting the possibility of a sell-off as traders attempt to recoup their gains following favorable regulatory developments.

It’s clear that there might be more market volatility in the upcoming weeks as the cryptocurrency community navigates them. It is recommended that traders and investors exercise caution and consider the potential for profit-taking operations to influence the short-term trajectory of Bitcoin.

As of the current moment, Bitcoin is priced at $45,352, reflecting a more than 0.13% increase in the past 24 hours.