Edition #2 — Jan 29, 2024
GBTC selloff continues but ETF inflows turn black
There’s been more doom and gloom for Bitcoin prices last week. Grayscale Bitcoin Trust, one of the key players in getting a Bitcoin ETF approved, has had to watch investors pull $2.8 billion from its fund, in favor of its rivals. This wasn’t helped by FTX liquidating its $597 million in GBTC as part of bankruptcy proceedings. But it’s not all bad.
The nine newly launched spot-bitcoin ETFs have seen some $4 billion in inflows within their first six trading days, with funds from BlackRock and Fidelity Investments each attracting more than $1 billion each according to BitMEX Research. But last week things began tapering off, with inflows slowing to a total of $857 million.
But the Grayscale problem remains for investors hoping for an upturn in prices. The world’s largest crypto asset manager still has tens of billions worth of Bitcoin in its coffers, raising questions over how long the sell-off will go on. The good news, for institutional investors at least, is that the ETF business is locked in a race to the bottom for who can charge the lowest fees.
While Grayscale slashed the fee on its Bitcoin trust to 1.5% from 2%, rivals including BlackRock and Fidelity offered promotional rates as low as zero for the first several months.
Looking ahead, Bitcoin has clawed back some of the losses it saw last week and is now hovering in the $41–42,000 range, as investors await the next move. That move could come from a variety of sources: the Chinese economy is experiencing turbulence as property giant Evergrande suspends trading after its share price fell 20%. Some analysts believe this could pull in other companies with it as a Hong Kong court ordered the company to be liquidated.
In the US meanwhile, this week will be dominated by earnings reports from the likes of Apple, Facebook, Microsoft, and other stock market giants. Among those is also the next Federal Open Market Committee (FOMC) meeting which will decide whether US interest rates will continue their slow taper of interest rates.
These decisions have caused significant swings in crypto asset prices in the past, and the news is due on Wednesday.
BTC Analysis
The ETF story is still dominating Bitcoin’s price movement. Last week we saw continued sell pressure, which leveled off once Bitcoin hit $38,500.
Since then, liquidity has recovered, helping the price to revert. It’s now sat comfortably in the middle of the current range which is set at $40–45,000. But there are several things that could force it out of that range.
Looking at orderbooks, there is still consistent buy pressure in the $38–35,000 range, indicating a gap between the bottom of the current range and where liquidity is currently waiting. This suggests the price could drop significantly if we fall out of the current range.
Contributing to that sell pressure is Coinbase — which has been slowly selling since January 21. While it seems to be trying to avoid disrupting markets too much, they are exerting significant pressure on the BTC price.
Away from Coinbase meanwhile, liquidity pools are concentrated around 45k to 43k, suggesting this could act as a bulwark against Coinbase’s slow sell off.
What’s next?
ETFs continue to exert dominance over the state of crypto asset prices this week, but the pace of outflows appears to be tapering off. The FTX selloff of its assets also appears to be coming to an end, helping create a more solid base above $40,000.
There are broader macro trends that could have a positive or negative effect on prices, including the Federal Reserve’s decision on interest rates and China’s overheating economy.
Do you like AQTIS and the content we’re releasing? Support our efforts by scrolling to the top of the page (desktop) and clicking the Follow and the “Clap” 👏 button. This is boosting the Medium algorithm, increasing our visibility! 👍
Coin of the week
Solana has outperformed the broader market in the recent bull phase from September to December and continues to do well, even as Bitcoin’s sell pressure dampens markets.
Activity on Solana has been ticking up, thanks in part to its booming DEX community. That appears to be thanks to Jupiter, the Solana-based DEX, and a slew of memecoins that have been trading on the exchange.
Investors have flocked to the Jupiter exchange, helping its 24-hour trading volume beat that of Uniswap by nearly $100 million according to CoinGecko.
But things may be about to cool off. Sell pressure is emerging around the $105 mark, as we can see from the chart below.
Diving into the Orderbooks, the pressure is confirmed. However, we can also see a lot of liquidity above this level — as we can see in the image below — suggesting some investors believe a breakout may be in the works.
But factoring in other data, we can see Solana is in a negative Premium period. Negative premium means that derivatives traders are bearish, or are opening more shorts than longs, as indicated below by the red bars in the Premium chart.
Meanwhile, the cumulative volume data — the difference between the buys and sells for each trading candle — suggests the balance in sentiment leans towards the bullish, suggesting Solana has more room to run in this phase.
You can get these alerts for free, in real-time, in the Quant-Alerts section of our Discord.
Looking Ahead
The interest rate decision by the Federal Reserve is likely to be the biggest story for crypto this week. Inflation has slowed to around 4% from highs of around 10%, suggesting the Fed’s strategy is helping slow down the economy.
While the FOMC has held rates steady, many are expecting rate cuts to start either this month or next. Whatever the result, expect crypto asset prices to respond accordingly.
Thanks for stopping by!
We hope you found value in our inaugural Market Insights Newsletter. Would you like to stay up to date on all the most important developments in the crypto markets?
Take the following steps if you’ve enjoyed reading our content and would like to receive this newsletter in your mailbox weekly:
- Click the “Clap” button
- Click “AQTIS”
- Click Follow
- Click the e-mail button ✉️
- Follow our socials: https://linktr.ee/aqtis
