Bitcoin (BTC) is expected to fall as low as $32,000 next month following the possible approval of a spot ETF, according to data provider CryptoQuant.
CryptoQuant said in a note to CoinDesk that traders' unrealized profits currently remain at levels that historically precede a correction, described as a potential “sell the news” event.
“Sell the News” is a well-known term in the capital markets. He describes how asset prices, debt and sentiment rise in the lead-up to a bullish event, only to fall again shortly afterwards.
That's because smart traders capitalize on the crowded long trade, trapping those with leverage and forcing them to close or be liquidated when the price goes against them.
An approved ETF is considered a bullish event as it allows institutional inflows into Bitcoin, creating sustained buying pressure.
“Short-term Bitcoin holders are experiencing high unrealized profit margins of 30%, which has historically preceded price corrections (red circles),” CryptoQuant wrote in the note. “Furthermore, short-term holders are still spending Bitcoin at a profit, while recoveries typically only occur when short-term losses are realized.”
CryptoQuant added that Bitcoin price could fall as low as $32,000, which is the holder's short-term realized price.
Capriole Investments said “conservative portfolio management” makes sense ahead of the possible approval of a spot ETF.
“With Bitcoin up over 60% since the ETF mania began a few months ago and every man and dog in this region. The risk for long Bitcoin positions is significantly higher today than it was a few weeks ago,” Capriole wrote in a blog post.
“Sell the news” events are common in Bitcoin’s history: in 2017, BTC peaked at $20,000 after the CME listed BTC futures, and in 2021, the world’s largest cryptocurrency hit its peak again Peaked and reached $65,000 after Coinbase completed its IPO before losing ground following months.
Bitcoin is currently trading at $42,450 after starting the year at $16,000. According to CoinMarketCap, daily trading volume remains constant at $80 billion.
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