Bitcoin (BTC) has fallen more than 5% to $42,600 since spot ETFs launched in the US on Thursday, in what looks like classic sell-the-fact price action.
According to an analysis of Bitcoin’s price patterns and technical indicators by 10x Research, the selloff could continue in the short term.
“Bitcoin’s RSI divergence signals a correction,” 10x Research led by Markus Thielen said in a note to clients on Monday, adding that the pullback could lose strength near the dynamic support level at $38,000.
A bearish divergence occurs when prices reach a new extreme and momentum indicators such as the Relative Strength Index (RSI) fail to do so, indicating upward exhaustion.
BTC hit a two-year high of over $49,000 last week, which the 14-day RSI failed to confirm, as seen in the chart below. The subsequent price drop confirmed the bearish divergence.
The MACD histogram, used to measure trend strength and changes, has fallen below zero, indicating a bearish momentum shift.
According to Thielen, the move to other low-fee options for investors in Grayscale's ETF, the Grayscale Bitcoin Trust (GBTC), will likely weigh on the price of Bitcoin. While Grayscale charges 1.5%, other asset managers such as BlackRock charge 0.25%. GBTC, formerly a closed trust, is one of the largest Bitcoin holders with a coin holdings of over $27 billion. GBTC shares began trading in 2013 and were eligible for returns on January 11th.
“Grayscale is betting that investors will slowly move away from its 1.5% annual management fee ETF offering (for tax reasons) in favor of other reputable firms offering 80% lower fees. There has been a lot of negative news surrounding parent company DCG and “Grayscale itself notably charges a 2.0% management fee for a product that was at one point trading at a 50% discount to its net asset value – overcharging GBTC holders ( market cap $27 billion),” said 10x.
“Investors will initially sell before transferring their BTC exposure to another ETF issuer. This will create downward pressure for Bitcoin and remain an overhang,” 10x added.
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