© Reuters Bitcoin Price Action Explained: Here's the Real Reason Why BTC Dropped After ETF Approval
U.Today – 2024 has already proven to be a wild ride for investors. In what was probably the most exciting financial product launch in history, the SEC approved 10 spot Bitcoin ETF products for trading in US markets.
In reaction, BTC prices rose to a new multi-year high, reaching $49,102. The market then fell 18% over the weekend, hitting new year-to-date lows of $40,236.
As with any major event, Bitcoin holders enjoy debating whether its price was included or not.
In this regard, Julio Moreno, head of research at CryptoQuant, debunks the widely spread narrative that the Bitcoin price drop was caused by the sale of Bitcoin by Grayscale's GBTC.
Before converting to an ETF from a trust, Grayscale Bitcoin Trust (GBTC) was one of the only options for stock traders in the United States to gain exposure to Bitcoin price swings without having to purchase the actual cryptocurrency.
While GBTC has seen notable outflows after being included in an ETF, a large portion of them have come from investors moving to ETFs with lower fees.
Moreno highlighted that while GBTC sold approximately 60,000 Bitcoins, other Bitcoin ETFs net bought approximately 72,000 Bitcoins, thus offsetting Grayscale's GBTC's BTC sales.
He attributes the volatility in Bitcoin's price to sales by Bitcoin holders (short-term traders and whales) who made profits following last year's surge, noting that the approval of the ETF could simply be the event of “selling the news”.
What on-chain data says
According to on-chain analytics firm Glassnode, Bitcoin's price drop could have been driven by both derivatives leverage and spot profit taking.
However, several metrics in both the on-chain and derivatives domains suggest that a non-trivial portion of Bitcoin investors treated the ETF approval as a news-selling event.
While there are other key factors behind the interim volatility, both the futures and options markets have seen a significant increase in open interest (OI) since mid-October, according to Glassnode.
Open interest in both markets remains around multi-year highs, showing that leverage is increasing and becoming a more dominant force in the markets.
At the time of writing, BTC was up 0.58% in the last 24 hours to $41,543, according to data from CoinMarketCap.
This article was originally published on U.Today.
