Bitcoin has always stood out as a benchmark for market trends and investor sentiment. Recent developments, particularly concerning Bitcoin Exchange-Traded Funds (ETFs) in the United States, have triggered notable movements in Bitcoin’s price. 10x Research, a leading research firm for crypto traders, has been closely monitoring these changes, offering valuable insights into the current market dynamics.
ETF Approval and Market Response
In their December 29 note, titled ‘How should traders position themselves in the uncertain ETF approval period’, 10x Research highlighted a significant triangle pattern in Bitcoin’s price chart. This pattern typically forecasts a movement of plus or minus 10% in either direction. Following the pattern’s breakout, Bitcoin indeed rallied, but such patterns often suggest a retrace back to the breakout point, which in this case is around $44,000.
The inaugural trading day of the first Bitcoin ETF in the U.S. saw Bitcoin ascend to $48,500. This level not only aligns with the triangle breakout projection but also represents the 2-3 year average price level for investors, often perceived as a resistance point. This event marks a significant milestone in Bitcoin’s journey, reflecting the high inflow expectations from investors.
Historical Retracements: A Pattern to Note
Bitcoin’s history is not devoid of significant price retracements, as seen after pivotal events like the December 2017 Bitcoin Futures launch, the Coinbase listing in April 2021, and the October 2021 Bitcoin ETF based on Futures launch. These instances are indicative of potential market fatigue that might follow major developments.
10x Research’s analysis of Bitcoin’s price patterns and technical indicators points towards a potential pullback. The currency’s recent decline to $42,600 post the ETF debut is a classic “sell the fact” reaction. The Relative Strength Index (RSI) divergence, in particular, signals a correction, with a pullback potentially bottoming out near the dynamic support level of $38,000.
A bearish divergence occurs when the price reaches a new high while the momentum indicators like the RSI do not, hinting at a potential exhaustion in the uptrend. Bitcoin’s failure to sustain its two-year high above $49,000, not confirmed by the 14-day RSI, corroborates this divergence.
The Role of Grayscale ETF and Market Dynamics
Grayscale’s ETF, the Grayscale Bitcoin Trust (GBTC), holds a significant position in the market, with a coin stash of over $27 billion. The shift of investors from Grayscale’s higher-fee ETF to other low-fee options is expected to exert downward pressure on Bitcoin prices. The recent negative news surrounding Grayscale and its parent company DCG, particularly regarding their management fees, might further influence investor sentiment and market dynamics.
Source: https://coinpedia.org/news/how-low-will-bitcoin-price-drop-10xresearch-reveals-potential-low-levels/