According to a report by CoinDesk, blockchain data analytics company CryptoQuant believes that the market may experience a “Sell The News” situation, predicting that if a Bitcoin spot ETF is approved next month, the price of Bitcoin (BTC) could retrace to $32,000.
“Sell The News” is a famous term in the capital markets, describing a phenomenon where asset prices, leverage, and emotions often rise before a bullish event and quickly decline shortly after the event actually occurs. This is because savvy traders take advantage of overcrowded long positions, putting leveraged investors in a difficult position and forcing them to close or liquidate positions at unfavorable prices.
CryptoQuant points out that Bitcoin short-term holders are currently experiencing up to a 30% unrealized profit ratio, which has historically been a precursor to price corrections in the market. Additionally, the company states that “short-term holders are selling Bitcoin while still profitable, and rebounds often occur after short-term losses are realized.”
CryptoQuant further adds that the price of Bitcoin could drop to $32,000, which is the realized price for short-term holders.
Digital asset hedge fund Capriole Investments suggests that “conservative portfolio management” is wise on the eve of a potential spot ETF approval. Since the ETF hype began a few months ago, the price of Bitcoin has risen over 60%, with many expecting a decision on approval around January 10. The company wrote in a blog post:
The phenomenon of Sell The News is common in Bitcoin history. In 2017, the price of Bitcoin peaked near $20,000 after the launch of BTC futures on CME, similarly, in 2021, Bitcoin reached $65,000 after listing on the cryptocurrency exchange Coinbase, but in the months following these events, the price of Bitcoin experienced declines.
Related report: “CryptoQuant: Bitcoin could reach $160,000 in this cycle peak”