Bitcoin’s ETF resolve injects volatility into the market

Posted: September 6, 2023

• The broader market seemed unsure about Bitcoin’s next direction.
• The CVD flipped positive, but trended negative moments after.

The court ruling in favor of Grayscale, to introduce a Bitcoin [BTC] ETF, caused the market volatility to spike. For a while, Bitcoin, alongside other cryptocurrencies in the market, experienced an elongated period of consolidation as prices contracted. 

Read Bitcoin’s [BTC] Price Prediction 2023-2024

A quick back-and-forth 

While Grayscale’s favorable ruling drove BTC to $28,000, the delay in the decision caused the prices to pull back and erased all the gains. Moreover, Kaiko Research’s report suggested that the initial ruling affected the Cumulative Volume Delta (CVD).

Source: Kaiko Research

The CVD compares buying and selling volume while identifying an asset’s micro and macro price action overview. The cryptocurrency market data provider also noted that the CVD flipped positive on exchanges including Binance and Coinbase.

The report noted,

“The initial court ruling led to a flurry of buying, which we can see looking at the cumulative volume delta (CVD) on major pairs, which flipped positive with Binance showing +$50mn on its BTC-USDT pair. The rise on Coinbase was more gradual, peaking at +$35mn about 12 hours after the ruling.”

But when the SEC made its decision public, BTC/USDT and BTC/TUSD pairs on Binance dropped to -$100 million. The same thing also happened on the Coinbase exchange.

However, despite Grayscale’s partial victory, Bitcoin’s volume failed to rise significantly. Referring to the volume on during the period, Kaiko mentioned,

“In a sign of just how muted trade volume has been the past few months, the Grayscale ruling was hardly able to boost BTC’s volumes. August 29 ranked just 504 out of 973 days (since the start of 2021) in terms of BTC volume.”

Silence in the market 

As per activity in the derivates market, Kaiko noted that Open Interest decreased between 29 and 31 August. Open Interest is the value of the futures contracts open at the end of a trading day. 

When the Open Interest increases, it means that liquidity in the contract increases. But when it decreases, it implies the closure of many contracts in the market. Therefore, the decrease suggests that liquidity has been reduced, and there was no strength behind BTC’s trajectory.

Source: Kaiko Research

At press time, Bitcoin’s funding rate was very mild, at 0.002%. Before now, there was an ebb and flow direction of the funding rate, indicating skepticism around BTC’s movement.

The state of the funding rate at press time meant that there were still doubts about an upward Bitcoin movement.

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For the weighted sentiment, Santiment showed that the metric had risen into the positive region. Weighted sentiment shows the unique social volume around an asset with respect to the perception the community has.

Source: Kaiko Research

Therefore, at 0.477, the weighted sentiment at press time meant that the broader market believed in Bitcoin’s ability to rise higher in the coming weeks.