by The Burning Pocket

Jan. 18, 2024

For the past few months, Bitcoin has been a hot topic in the news, dominating discussions on CNBC, popping up on your social media feed, and possibly coming up in conversations with acquaintances or relatives. You might have initially dismissed this hype, wondering why Bitcoin is suddenly relevant again. Out of curiosity, you pop open the laptop, attack that Google search bar, and begin to dive in. Upon further research, it becomes clear that industry “experts” are predicting a surge in Bitcoin’s value upon an ETF approval as institutional competition heats up with traditional finance pouring in, leading to a “god candle.” But is it too good to be true?

Let’s rewind to Oct. 2017, CME Group announced it was bringing Bitcoin futures to Wall Street, leading to a dramatic rise in price from $6,000 to nearly $20,000 in two months. In anticipation of opening the crypto market up to more than just degenerate retail traders, sentiment turned euphoric as investors began calling for $50K-$100K prices. However, on the day of the CME Futures launch, an unexpected price drop occurred. Over the following months, despite initial beliefs that the dip was a buying opportunity, Bitcoin’s price continued to fall, eventually returning to around $6,000. This decline was partly due to seasoned traders cashing in on a flaming hot market in a classic “sell the news” event, and exacerbated by a wave of new, overly enthusiastic traders employing risky strategies, which led to widespread liquidations and a further drop in price. Thus the overexuberant outlook did not bode well for those who bought into the hype.

Nearly a week has passed since the launch of the new Bitcoin ETFs, yet the absence of a “god candle” has left investors puzzled. Could this be history repeating itself as a “sell the news” event? Perhaps the recent rise in Bitcoin’s price was primarily lead by institutions involved accumulating their holdings prior to the ETF approval and the euphoric hopes of investors believing the approval would only send price higher? What investors may have missed with ETFs being such a new addition to conventional financial markets is whether traditional investors are even interested in gaining exposure at the current price levels, moreover if an ETF is adequate exposure at all.

The future implications of these ETFs remains uncertain, but it’s important to note that they are created to reflect Bitcoin’s value, rather than influencing it directly. As such, its important to understand these products, weighing the fundamentals and technicals of the underlying asset. Bitcoin has always been a volatile asset, driven by hype, fear, and greed as reflected in the charts. The best time to buy is during max fear and sell during max greed. As traders, we must pay close attention to overall market sentiment and ask “is the market being fearful or greedy?” Historically, when all eyes are on Bitcoin with massive media attention after a big run up in price, a cool off soon follows.