After a few years of waiting, the time had come last Thursday: the US Securities and Exchange Commission (SEC) approved eleven applications for spot ETFs for Bitcoin (BTC). Thursday was the first day of trading for these exchange traded funds. Despite all the optimism of the last few months, the market reacted with significantly red prices – and red quantities.
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Bitcoin market in doubt: many buyers and sellers
Bitcoin price rose about 7% from Thursday morning through the afternoon, but lost all of its gains thereafter. Investors were probably very unclear about how the price would be affected – at least that's what data from CoinGlass shows.
Last Thursday, around $40 million worth of short positions were liquidated on regular crypto exchanges. This must have happened during the rise because liquidations always occur at a loss. Long positions worth $42 million were also liquidated on the same day. So this will have happened during the decline.
CoinGlass data also shows that uncertainty has been prevalent for days. The previous days' liquidations involved roughly the same number of short and long positions. January 8th was an exception. This can be explained by the large increase on this day, which also ended as a successful day.
Mainly GBTC revenue source?
There was also good news for the brand new spot ETFs, which immediately became very popular. Trading volume was more than $4.6 billion on Thursday. The most popular was GBTC, Grayscale's fund. This was previously a regular trust fund and therefore slightly more volatile than Bitcoin itself, but on Thursday this fund was quickly converted into a spot ETF. As a result, this fund immediately managed billions of dollars.
However, Bloomberg analyst Eric Balchunas believes that this volume is mainly due to selling by GBTC investors. The other spot ETFs had to start from scratch, but many of these ETFs immediately saw inflows in the millions or even more. So not all the money was there
Think about what all those dollars flying around mean. For the volume of the 10 new ETFs = buy BTC today. Clear cut. But GBTC volume will probably sell EVERYTHING and maybe $BITO There are probably too many countermeasures. Just my opinion, not 100%, we will know more when the streams arrive tonight
— Eric Balchunas (@EricBalchunas) January 11, 2024
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