Interest in bitcoin has reached fever pitch as the positive announcement of a Spot Bitcoin ETF looms ever closer. However, will the market sell off heavily when the news hits?
The typical sell the news event
‘Sell the news’ events are a phenomenon that is well known in markets. When very positive news comes out on a stock, instead of an expected corresponding price surge to the upside, the complete opposite happens, and eager investors who jumped on board in order to take advantage of the price gains see their positions sink, and many are forced to sell at a loss as the big money shorts the stock, with a view to buying in again lower once the retail has capitulated.
Of course, this doesn’t always happen. The news can be a complete surprise and can be so positive that even the whales jump onto the trade and ride it to the upside.
ETF impact difficult to predict
When the expected positive announcement of the approval of one or more Spot Bitcoin ETFs hits the crypto market there are factors to take into consideration that do not make the forecast of a plunge or a spike in price easy to make.
One factor that does appear to be reasonably solid so far is that the ETF will be approved in early January. Everything points to an approval in the next two weeks, which is an incredibly short time away.
So the time of the ETF approval is known to a reasonable degree of certainty, but what remains a real unknown is the amount of institutional demand that will come in, and how quickly it will arrive.
Bitcoin ready for a sell-off?
Source: Trading View
Looking at where bitcoin ($BTC) is now, it could be ripe for a more extensive pullback. The price is currently at resistance, although a flag does appear to be forming, which is a bullish pattern. With a couple of weeks still to run, $BTC could break out again and conceivably reach up to touch the 0.618 fibonacci, or even hit the round number of $50,000.
If this should happen then it could probably be said that the pullback may become more likely, especially taking into account the large amount of upward gains the $BTC price has already made.
It’s also not beyond the realms of possibility that if a massive amount of buying does take place, the measured move for the bull flag already mentioned could take the price to around $58,000, which corresponds with the 0.786 fibonacci.
A unique event in world finance
The Spot Bitcoin ETF announcement event is something absolutely unique in the world of finance. Never before have a large group of ETFs awaited approval, potentially on the same date, for a new asset class such as Bitcoin.
It is also for this reason that the market is likely to be completely undecided as to the ultimate direction of price. For those sitting on the sidelines and spectating, what unfolds is likely to be riveting viewing.
And for those holding bitcoin, or even various of the cryptocurrencies, the coming ride, whether it be exhilarating or disappointing, can be one that goes down in the history books.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
