January 15, 2024 at 13:39 GMTModified date: January 15, 2024 at 13:39 GMT
January 15, 2024 at 13:39 GMT

What’s next for Bitcoin following ETF approval?

The greenlighting of spot Bitcoin ETFs in the US has sparked widespread speculation about the future price trends of the cryptocurrency.

What’s next for Bitcoin following ETF approval?

The approval of spot Bitcoin exchange-traded funds (ETFs) in the US has fuelled extensive speculation regarding the cryptocurrency’s price movements.

While many expected that these ETFs would boost Bitcoin’s demand, the market witnessed an unexpected twist. Contrary to the anticipations, the cryptocurrency has experienced a recent downturn in its price.

Market analysts are now offering a wide range of forecasts for Bitcoin’s future, with predictions varying dramatically. Some anticipate a low of $38,000, while others see potential highs reaching $100,000.

The initial reaction to the ETF approval briefly pushed Bitcoin’s price over $48,000, but it quickly retreated to around $41,000 the following day.

Bloomberg’s ETF analyst, James Seyffart, had previously suggested that the market might be overestimating the short-term impact of the ETFs, yet possibly underestimating their long-term effects.

As the top coin struggles in the red, changing hands for $42,645 at press time, here are some of the varied forecasts made by analysts for Bitcoin’s price in the near future.

Bitcoin to the moon?

Optimistic analysts are seeing a bright future for Bitcoin, with some even predicting a staggering rise to $500,000. 

This bullish outlook is driven by the belief that the approval of spot Bitcoin ETFs will significantly increase mainstream adoption and investment in Bitcoin. 

Another perspective comes from a noted crypto trader who accurately predicted Bitcoin’s 2022 market bottom. DonAlt is now forecasting a rise to $60,000, citing increased institutional interest and the potential for Bitcoin to become a more widely accepted store of value. 

These bullish predictions hinge on the idea that Bitcoin’s limited supply and increasing demand from both retail and institutional investors will drive its price upwards.

Bears to take over?

However, not all forecasts are positive. Some analysts are adopting a bearish stance, warning of a potential drop to as low as $38,000. 

This perspective is grounded in concerns about an impending leverage flush in the Bitcoin market, which could lead to a significant price drop. 

Technical analysis from various sources also suggests a possible deeper pullback, with key indicators pointing towards a bearish trend in the short term. 

These analysts argue that the current market conditions, combined with macroeconomic factors and regulatory uncertainties, could exert downward pressure on Bitcoin’s price.

A neutral sentiment 

Amidst these polarised views, some in the market have also returned to a neutral state. 

The initial excitement following the ETF approval has cooled down, and investors are now taking a more cautious approach. 

The Bitcoin Fear and Greed Index, a popular metric used to gauge market sentiment, has shown a significant drop to 52, reflecting neutrality. This shift suggests that investors are weighing the potential risks and rewards more carefully.

Therefore, a more balanced market outlook has been taken by these investors as they believe the ETF approval to already be priced in for the top coin. 

ETF volume yet to influence the spot market

Despite the significant volume of transactions in the newly approved Bitcoin ETFs, there has been a lack of corresponding impact on the spot $BTC price. 

This phenomenon can be attributed to the fact that a substantial portion of these ETF transactions are occurring over-the-counter (OTC), rather than through traditional exchange platforms. 

A new report by market maker and liquidity provider, Wintermute, said that Bitcoin’s OTC volume has gone up 400% throughout the year as volumes moved off-exchanges.

OTC trading, often preferred by large institutional investors for its ability to handle large volumes without immediate market impact. This means that these sizable ETF trades are not directly influencing the spot market prices of Bitcoin. 

Consequently, it could be said that it may take some time before the effects of this high ETF volume begin to significantly permeate into the spot market.