Why A Spot Bitcoin ETF Approval Might Result In A Massive Dump

Key Insights

• The expected January 10th approval of a spot Bitcoin ETF has sparked excitement, but CryptoQuant warns of a potential dump.
• CryptoQuant anticipates a price drop as low as $32,000 due to possibly limited new liquidity from the ETF.
• CryptoQuant highlighted a market cap increase since October, showing that the expected January liquidity boost may have already occurred.
• CryptoQuant believes investors who bought BTC before 2021 are likely to hold, reducing the potential selling pressure.
• Ark Invest's sale of GBTC shares for BITO shares shows differing investor approaches to the incoming BTC ETFs

A spot Bitcoin ETF is expected to be approved by the SEC by January 10, 2024, which has had the Bitcoin market giddy with expectation for months now.

Everyone expects Bitcoin's price to suddenly expand upwards and continue that way.

Not everyone is optimistic about the chances of a spot BTC ETF though, and one of these is CryptoQuant, the blockchain analytics firm.

Here's How That Might Happen To Bitcoin

According to a recent report, CryptoQuant states that the coming ETF approval could spark a "sell the news" event.

When this happens, investors who have been hoarding BTC in wait for the ETFs may decide to cash out their gains, causing a massive dump.

According to CryptoQuant, if the spot ETF is approved, the price of Bitcoin might drop as low as $32,000.

CryptoQuant says that there is currently too much demand for Bitcoin, and if an ETF is approved, we might not see new liquidity pouting into the market, as everyone hopes. 

Moreso, CryptoQuant notes that since October, Bitcoin's market cap has been in a constant rally, and has risen from about $550 billion to $832 billion. 

This suggests that the influx of liquidity we expect to happen in January has already been happening for months now.

Nevertheless, CryptoQuant also stated that the long-term holders who bought around 2021 or earlier, are unlikely to dump their Bitcoin.

Ark Invest's Cathie Wood Makes pre-ETF Moves

According to recent news, ARK Invest has sold all of its shares of the Grayscale Bitcoin Trust (GBTC) and has used a portion of the profits ($92 million) to purchase BITO shares.

With a $100 million holding, ARK Invest is now the second-largest BITO holder, according to Bloomberg Intelligence.

The ARK 21Shares Bitcoin ETF (ARKB), which the asset management has applied to the SEC to create, is currently awaiting clearance.

By investing in BITO, ARK Invest appears to either be increasing its exposure to Bitcoin while awaiting the SEC's ruling, or using the futures-based ETF as a temporary replacement for its own spot ETF.

This difference in approach to ETF approvals shows that different investors can have different expectations and points view on different things

While some investors are buying the news of a futures-based ETF launch, others are getting ready to sell.

Overall, the market's reactions to the coming ETFs will depend largely on which side wins, whether buyers or sellers.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.