Bitcoin Forecast: Possible Deeper Pullback to $38K

Bitcoin Forecast: Possible Deeper Pullback to $38K

Bitcoin’s RSI Divergence Signals Correction

Bitcoin (BTC) forecast has faced a decline of over 5% to $42,600 since the debut of spot ETFs in the U.S. This drop appears to be a classic case of “sell the fact” price action, leading to concerns of a continued sell-off in the near term.

According to the analysis conducted by 10x Research, led by Markus Thielen, Bitcoin’s Relative Strength Index (RSI) divergence is indicating a potential correction. The note to clients suggests that the pullback might find support near the dynamic level of $38,000.

Understanding Bearish Divergence

A bearish divergence occurs when prices reach new extremes. However, momentum indicators like RSI fail to confirm, hinting at possible upside exhaustion. BTC reached a two-year high above $49,000 last week, but the 14-day RSI failed to confirm this move, validating the bearish divergence.

The Moving Average Convergence Divergence (MACD) histogram, used to gauge trend strength, has crossed below zero, signalling a bearish shift in momentum. This adds to the technical indicators suggesting a potential downward movement for Bitcoin.

Impact of Grayscale’s ETF Changes

10x Research points out that investors in Grayscale’s ETF, the Grayscale Bitcoin Trust (GBTC), switching to other low-fee options could weigh on Bitcoin’s price. Grayscale charges a 1.5% fee, while other asset managers like BlackRock charge only 0.25%. This shift might create downside pressure for Bitcoin, acting as an overhang on its price.

After reaching two-year price highs following the approval of spot Bitcoin ETFs in the U.S., Bitcoin’s price experienced a sharp drop to below $42,000. The decline of over 10% in the last week reflects a “sell the news” reaction, where traders buy based on speculation and then sell when the anticipated event materializes.

SEC Approves 11 Spot ETFs

The Securities and Exchange Commission (SEC) approved 11 spot ETFs for the first time, including giants like BlackRock, Fidelity, and Ark. Despite the initial positive market reaction, the subsequent drop in Bitcoin’s price suggests that much of the ETF volume on the first day was likely bearish.

SEC Chairman Gary Gensler, known for his scepticism toward crypto investments, was one of three commissioners to approve the spot BTC ETFs. His likely deciding vote, with a 3-2 approval, indicates how close the ETFs came to being rejected. Gensler clarified that the SEC does not “approve or endorse” Bitcoin despite the approval.

Ethereum ETF Expectations

With Bitcoin facing a potential correction post-ETF approval, attention turns to Ethereum. Analysts predict a spot Ethereum ETF approval, with major players like Vaneck, BlackRock, and Fidelity applying. Expectations are that Ethereum’s positive momentum might continue until the expected approval, akin to a “buy the rumor” scenario.

The approval of multiple spot Bitcoin ETFs has sparked a fee war among issuers. Notably, BlackRock’s surprising move to set its fee at 0.25%, lower than expected, intensifies the competition among ETF providers. These lower fees are viewed as positive news for investors and may put pressure on crypto exchange fees.

Spot Bitcoin ETFs Forecast: Unlocking Opportunities and Challenges

The approval of spot Bitcoin ETFs in the U.S. marks a milestone, potentially unlocking a $50 trillion market. However, the market’s underwhelming price action and the competition among ETFs pose challenges. Investors, financial advisors, and retail participants are now navigating the opportunities and complexities presented by these newly approved investment vehicles.

New Year, New Opportunity for Bitcoin Forecast

As the crypto community celebrates the SEC’s decision to approve spot Bitcoin ETFs, the cryptocurrency market stands at a crucial juncture. Historical trends suggest a potential sell-the-news correction, reminiscent of previous market events. With billions in immediate inflows anticipated, Bitcoin’s future trajectory post-ETF approval remains uncertain. Analysts and investors alike are closely monitoring the market dynamics to gauge the long-term impact of these regulatory decisions.