Monthly Check Up: Analyzing the markets initial reactions to the spot Bitcoin ETF

After a successful launch, much of the wealth management industry still remains on the sidelines. When will they make the move?

‍

The launch of the first ever spot Bitcoin ETF has come and gone. One month in, we are going to provide some analysis breaking down the first 30 trading days to see how it has performed thus far, as well as offering some technical indicators and macro analysis to assess its forthcoming potential.

A rocky start

After the initial ETF launch saw over $850 million of net inflows during the first two trading days, growth stalled after reports revealed that FTX executed sales of $1 billion of Grayscale's Bitcoin ETF.

Looking at the chart below, we can see that this sell-off had a material impact on BTC's short-term price dynamics, quickly dropping down to the 39k range after briefly touching 48k. These ETFs showed consistent outflows from the inaugural trading day (January 11th) until January 26th.

This dynamic was somewhat expected as investors have waited years for sufficient exit liquidity to take profits. Since this initial sell off, BTC has surged by 30%, ETH by 23% and SOL by 19%. This underscores a clear correlation between ETF inflows and market price movements.

A stronger second act

Since GBTC’s well- documented sell-off, the market’s latest rally has been predominantly driven by the US market, as evidenced by Bitcoin's price premium on Coinbase reaching a 9-month high. The gap with Binance, initially at $50, has recently narrowed to $20 as buying enthusiasm subsides.

Where do we go from here?

Reporting from across the industry has indicated that another large sell off is in the works. News is circulating that Genesis has obtained court clearance to sell approximately $1.3 billion worth of GBTC shares, such a large outflow would likely impact Bitcoin’s price dynamics during this period.

Beyond BTC, institutional interest in ETH has been relatively tepid. However, as institutional interest in the sector continues, we anticipate a shift in sentiment in 2024. Following ETF approvals, ETHBTC surged by 20% amid expectations of a forthcoming ETH spot ETF. This currency pair experienced a decline of over 30% in 2023 as BTC retained its dominance, driven by the digital gold narrative and the eagerly awaited BTC spot ETF.

Disclaimer

‍

This research is for informational use only. This is not investment advice. Other than disclosures relating to Secure Digital Markets this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.

Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While Secure Digital Markets has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.

Unless otherwise provided in a separate agreement, Secure Digital Markets does not represent that the report contents meet all of the presentation and/or disclosure standards applicable in the jurisdiction the recipient is located. Secure Digital Markets and their officers, directors and employees shall not be responsible or liable for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses, or opinions within the report.

Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.

‍