In the midst of a strong upward trend, and after the price of Bitcoin crossed $45,000, a sharp drop was suddenly recorded within 10 minutes. What caused the drop in Bitcoin price? Regardless of the specific trigger, the market seems to be stretched and leveraged to the limit for the ETF decision.
Unexpected 10% Drop in Bitcoin Price
A sharp and unexpected movement occurred on Wednesday in the price of bitcoin, which also dragged the entire crypto market down. After some shuffling in the price of 2-4 thousand dollars, a relatively rapid increase in the currency’s prices began since Tuesday, after the return from the New Year’s celebrations and in light of the growing expectations for the approval of the ETFs, until the currency crossed the symbolic threshold of 45 thousand dollars per coin and even touched 45,500. Suddenly, on Wednesday, within about 10 minutes, Bitcoin dropped by about 10% back towards $40,000. After that, the coin recovered a little and returned to about 43 thousand dollars per coin, or slightly more.
What caused this unusual price drop?
Apparently, the initial trigger was a report by Matrixport, a digital asset company from Singapore, according to which the SEC is unlikely to approve the ETFs, contrary to market predictions. that he will approve the ETF on the spot price of Bitcoin,” they wrote in the report. According to them, all five members of the committee who will make the decision regarding the ETFs belong to the democratic camp and do not support crypto. The connection between the drop in price and the publication of the report is only an estimate, resulting from the fact that two events happened in close proximity.
At the same time, it is difficult to see how such a report from a relatively anonymous and ineffective company can initiate such a move in the market. Apart from the fact that it is a fairly insignificant company, the claims themselves that emerge from the report are quite weak. Gensler’s position is not a scoop. Everyone knows his approach and concerns about the crypto world, and this approach is taken into account in all assessments made in the market. But despite his well-known position, the estimates of all industry activists are that the certificates will be approved with a fairly high degree of certainty.
These estimates are based, among other things, on the work that the court required the SEC to do to give a few more serious arguments for the disqualification of the ETFs, which apparently do not exist. If it is allowed to trade in Bitcoin in the United States, and it is allowed to trade ETFs on the price of Bitcoin with the help of futures contracts, why wouldn’t it also be allowed to trade ETFs on the price of Bitcoin itself? As long as cryptocurrencies are not going to be completely banned in the United States, the SEC, with all its distaste for the field, will have a hard time finding good reasons that will stand the test of court. The SEC has no interest in being humiliated in court again after quite a few miscarriages in the past year.
Also, the negotiations with the companies and the improvements they introduced in their applications according to the SEC’s guidelines (when some of the meetings were held during the holidays!) show that the question is not whether the ETFs will be approved but under what conditions, and that the approval is quite close. On the “Block” crypto website, anonymous sources reported that on Wednesday another meeting was held between the representatives of the Nasdaq Stock Exchange and the representatives of the SEC, in part regarding the approval of the ETFs.
The Fox network report
A similar report was published that morning on the Fox network about a meeting of the representatives of the Nasdaq Stock Exchange, the New York Stock Exchange, and the CBO Exchange with SEC representatives for “final comments” regarding the applications. All signs show that the approval is close and will be received even before the deadline next week.
The crypto industry didn’t like this strange report. Alex Thorne, head of the research department of Galaxy, one of the strongest companies in the crypto field, got a little upset about this report and called it “embarrassing” and the claims presented in it “stupid.” In fact, even the CEO of the company itself claims that “it is unrealistic to believe that a Matrixport report can cause a market worth about a trillion dollars to crash.”
That bull run was kicked off by Franklin Templeton’s September ETF filing. They write: “There was now more than one big traditional…
— Alex Thorn (@intangiblecoins) January 3, 2024
In any case, it is quite clear that Gensler’s principled position against crypto cannot be the argument that will break the market at this point, and it is difficult to see how a report that claims this can be a trigger for a 10% drop in a few minutes.
One more reason why we experienced a 10% drop in Bitcoin price
Still, the price of Bitcoin plummeted in the immediate vicinity of the report’s release. A more likely explanation is that Bitcoin was already on the edge of the cliff, and the report only gave it a slight push forward. The initial downward push caused a quick short squeeze, as the market is very tense and leveraged ahead of the decision regarding the ETFs. The bets on a spike in the price of Bitcoin are based on disordered leverage, and a downward movement that gained a little too much momentum apparently managed to set off a lot of triggers that caused a snowball.
According to estimates, derivatives worth $560 million were wiped out during the sharp downward movement due to closing margins and stop-loss orders that were placed too high, and with the momentum of closing the positions, the price continued to fall rapidly until it scraped the $40,000 mark again. Immediately afterwards, when the market realized how “serious” this report was and when some of the excess leverage was absorbed, the price began to recover. It is hoped that the market will now be a little more cautious and wait for a little more authoritative information regarding confirmation, yes or no. In any case, the leverage levels are still exaggerated, and it is possible that until the ETFs are approved (or not), we will see more similar shows.
- Recommended broker
Our recommendation:
Invest with Moneta Markets
Sell the news
It should be noted that there are more and more estimates that the approval of ETFs will actually trigger a drop in the price of Bitcoin in a “sell the news” type that will take a lot of hot air out of the market. For two months now, Bitcoin has had a positive momentum around the issue of ETFs and, in the meantime, has accumulated significant profits with a jump of about 100% during this time period, so it is difficult to see how the approval of the certificates will bring additional momentum. It is possible that in the first moments there will be a jump, which will bring the price perhaps even to 50 thousand dollars per coin, but it is difficult to see the enthusiasm taking it beyond that, according to the pessimists. The optimists, on the other hand, believe that a steady flow of new money will be created to provide support for higher prices.
Joel Kruger’s opinion
Here are the words of Joel Kruger, a strategist at LMAX Group: “As much as the event is already priced, given that so much is currently at stake, there is undoubtedly money sitting on the sidelines waiting for official approval.” According to him, after the approval (if it is positive), the price will jump by about 10%, but then we expect a short realization, after which the price will climb again. In the spring, he expects, the all-time record price of $69,000 will be broken.
My strategy is to understand that ETFs have been priced in over the past few months, so there are no new big positions.
Holding spot, with a few low-leverage trades on strongest altcoins and a few small caps
Angel investors are investing and preparing for new launches
Keeping it simple at the time being, a…
— Rager (@Rager) January 3, 2024
Walt Lund’s opinion
Walt Lund, a senior analyst at K33, believes that the approval of the certificate will be a “sell in the news” event with a 75% certainty level. “Everything points to traders being heavily exposed even before the confirmation, with foreigners pushing for a massive premium after three months of positive momentum.” At the same time, he acknowledges that the approval will also cause funds to flow into the market, but according to his calculations, $2.3 billion of “new money” will be needed to support the price in January. He estimates the possibility of such an occurrence at 20%.
More news from last week: what caused the drop in Bitcoin price?
Fidelity and Galaxy fees
The issuing companies continue to take final steps towards the long-awaited approval. Fidelity and Galaxy announced the expected management fees. Fidelity will charge 0.39% per year, and GalaxyInvesco will be more expensive and will charge 0.59% annually, although they will only start charging the fee after six months of operation. Three different companies, Fidelity and Wisdom-Tree Valkyrie, will use Jane Street Capital’s market-making services. Galaxy Invesco and BlackRock have appointed JP Morgan.
Jim Cramer and his approach to Bitcoin
Another crypto converter. Former hedge fund manager and now TV show host Jim Cramer is also changing his approach to Bitcoin. In the past, he was a harsh critic of the currency and the industry, but this week he called it a “technological marvel” and claimed that the late Charlie Munger was “blind” to it. Cramer’s words came as Bitcoin rose to over $45,000. Perhaps this is another reason for the fall of Bitcoin. Many times, Kramer’s recommendations met with a similar fate: sharp declines immediately after the recommendation of the popular TV show host. The phenomenon is so well known that an ETF was issued that works the opposite of Cramer’s recommendations, so quite a few crypto activists were worried after his latest statements, and their fear did come true.
The Solna surge
One of the biggest stories in crypto in the last year has been the surge of Solna, which may be starting to challenge Ethereum (although the gap between them is still huge). In the month of December, another history was recorded when the NFT sales on the Solana network surpassed those of Ethereum for the first time in history. At the same time, in light of the decline and almost disappearance of the NFT market, these are relatively negligible numbers. Sales on Solana reached 366 million dollars, while those on Ethereum amounted to 353 million. The number of unique users in the NFT market on Solna was double that on Ethereum.
Another sign of the singer’s popularity can be seen in the number of searches on the Google search engine. The search term “solna” (in English) surpassed the word “ethereum” for the first time in the week ending December 23rd. Last week, we also saw that in the same week, the trading volume of Solna on the decentralised exchanges exceeded that of Ethereum.
The administration in Argentina
The new administration in Argentina continues its pro-crypto activities. The government is working to promote a law that will allow the public to regulate their crypto holdings in terms of taxation and legal recognition. Citizens will be able to report their crypto holdings without providing additional exemptions regarding the source of the funds. If they report the assets by the end of March, the tax will be 5%; after that, it will rise to 10% until June, and from June to September, to 15%.
What did the major currencies do last week?
Wednesday’s falls moved all currencies into the weekly red after earlier staying in bright green territory.
- BITCOIN +3.28%: In summary of the roller coaster, Bitcoin lost only 1% of its value compared to the corresponding week and is now trading for 42.9 thousand dollars per currency.
- ETHEREUM +2.73%: Ethereum is now awaiting another major upgrade and, in the meantime, has lost much more than Bitcoin, with a weekly drop of 8% to a price of $2223 per coin.
- Binance Coin (BNB): Also started the year with a negative week, is down 3%, and is now trading for $314 per coin.
- Solana (SOL): The Solana dropped by about 4% this week and is now trading for exactly $100.
- Ripple (XRP): Ripple is down a significant 10% for the week and is now trading at $0.58 per coin.
- Cardano (ADA): Cardano recorded the sharpest decline among the major coins, losing 14% of its value. It is now trading for $0.56 per coin.
- Avalanche (AVAX): The new entrant to the list of majors manages to keep its place despite a weekly drop of 12% to a price of $36.77 per coin.
Check out our best brokers to buy cryptocurrency
Broker | Evaluation | Functions | Benefits | Spread | Leverage | Total Fees | Visit Provider |
|---|
 | 4.8 | CFDs: Crypto, Indices, Forex, Commodities, Shares, Options, ETFs |
| Tight Spreads | 1:300 | No internal deposit fee |
 | 4.4 | • FX • Metals • Indices • Cryptocurrencies • Stocks • Energies |
| Tight spreads starting from 0.0 | 1:400 | Depending on payment method |
 | 4.2 | 49 global currency pairs, commodities, index CFDs, stock CFDs, ETFs, metals, commodities, energy |
| Tight Spreads | 1:1 – 30:1 | No fees |
 | 4.0 | 1000+ financial instruments, including Foreign Exchange, Commodities, Indices, Share CFDs, Cryptos, ETFs, and Bonds |
| 1.27 | 1:500 | $3 per side for every 100,000 units |
 | 3.9 | 70 crypto-pairs, 49 forex pairs (usdzar as well), 5 metals, 26 Indices, 130 stocks, 6 oil and gas, 6 agriculture assets |
| Spreads from 0.00 | 1:999 | 3% + inactivity fee |
