Market Observations This Week: 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, along with the sell-off of Bitcoin spot ETFs. This week, that speculation has been confirmed, with Bitcoin falling 6.6% in the past 7 days and Ether dropping 12.5%.
The phenomenon of “Sell the News” is quite common in capital markets. It describes the rise in asset prices, leverage, and market sentiment leading up to a bullish event, but prices often quickly decline after the event occurs.
As for the main cause of the downturn, the market is attributing it to the sell-off of Grayscale’s GBTC. Grayscale’s GBTC business has been listed since 2013, meaning that investors’ Bitcoin has been locked in Grayscale for over 10 years without redemption. With the recent market recovery and the narrowing of the discount, it is natural for investors to choose to redeem GBTC and take profits.
As can be seen in the chart below, Grayscale has been experiencing daily net outflows of approximately $500-600 million, with a total outflow of $4.3 billion in less than 10 days since its listing. It is the only fund among the 11 BTC ETFs listed to have a net outflow. However, there seems to be a slowdown in outflows recently, with only $428 million flowing out on January 24th.
In the author’s subjective opinion, the impact of Grayscale’s sell-off is declining over time. As mentioned earlier, the outflow of GBTC has slowed down. While it is true that Grayscale has been aggressively selling, all the other BTC ETFs have seen net inflows of funds. Moreover, the total inflow of the 11 ETFs is greater than the outflow, so is the market really falling solely 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 GBTC shares (approximately $1 billion). They no longer hold any GBTC shares, which is expected to alleviate selling pressure.
However, there are still potential bearish factors in the market. GBTC is expected to continue to experience outflows, and whether the inflow of funds into the other 10 ETFs can support the selling pressure is the key focus going forward. It is expected that within the next two months, Mt.GOX will release 200,000 bitcoins to its original holders.
In December 2023, Mt.GOX’s creditors received compensation through PayPal in Japanese yen. Most of the Mt.GOX creditors purchased bitcoins at a price below $1,000.
Between November 2020 and 2022, the U.S. government seized a total of 207,189 bitcoins in three operations, including those related to the dark web black market, hacker Jimmy Zhong, and the hacker of the cryptocurrency exchange Bitfinex. They announced plans to sell these illicit bitcoins in four phases.
Key Industry News Recap This Week
CME FedWatch: 97.9% Probability of No Change in Interest Rates in February
According to CME FedWatch, there is a 97.9% probability that the Federal Reserve will keep interest rates unchanged in the 5.25%-5.50% range in February. The probability of a 25 basis point rate cut is 2.1%. In March, the probability of no change in interest rates is 52.9%, the cumulative probability of a 25 basis point rate cut is 46.2%, and the cumulative probability of a 50 basis point rate cut is 1.0%.
Ethereum Foundation: If Sepolia and Holesky Upgrades Go Smoothly, the Cancun Upgrade Will be Deployed on the Ethereum Mainnet
The Ethereum Foundation has announced that the Sepolia and Holesky upgrades will take place within the next two weeks. Dencun will be launched on Sepolia at epoch 132608 (January 31, 6:51 AM) and on Holesky at epoch 29696 (February 7, 7:35 PM). Once the testnet upgrades are successfully implemented, the Cancun upgrade will be deployed on the Ethereum mainnet as planned.
EigenLayer Postpones Open Staking Window to February 6-10 and Removes the Personal Cap on LST Tokens
EigenLayer, an Ethereum staking protocol, has announced that it will introduce three new LST tokens, sfrxETH, mETH, and LsETH, within the EigenLayer staking ecosystem. The personal cap of 200,000 ETH for LST tokens will also be removed.
Opinion articles present diverse views and do not represent the stance of “WEB3+.”
Proofreading Editor: Gao Jingyuan