Bitcoin (BTC) closed last week at around $41,750, down 5.0% from the first week of the new year, to close at around $43,750. The price showed significant fluctuations, mainly influenced by the increased market dynamics due to the approval of the BTC Spot ETF. The week began with a strong uptrend in anticipation of approval on Monday, with prices rising 9.0% to nearly $47,000. BTC approached $48,000 on Tuesday, but the false news about confirmation encountered significant volatility, causing a drop below $45,000 before stabilizing near $46,000 overnight.
On Wednesday, the SEC granted approval for the BTC Spot ETF, leading to heightened volatility, especially on Thursday when ETF trading began. After soaring to around $49,000, BTC began a significant downtrend, especially on Friday, when the price fell by 7.7% to below $43,000. Prices gradually declined over the weekend, ultimately ending the week at around $41,750.
The launch of the BTC Spot ETF has increased market activity. An analysis of daily trading volume on centralized exchanges for the seven-day period from January 8th to 14th showed that daily trading volume reached nearly $50 billion, the highest since November 2022. The launch of ETFs has increased activity in the entire market, and not just in BTC.
From January 8th to 14th, BTC's daily trading volume was recorded at $17.8 billion, an increase of 26% from the $14.1 billion recorded the previous week. Ethereum (ETH) recorded a total daily trading volume of $7.7 billion during the same period, an 83% increase from the $4.2 billion recorded the previous week, indicating increased activity across the market.
The recent strength of the market compared to BTC is further substantiated by analyzing BTC's dominance in terms of market capitalization relative to the overall digital asset market. At the end of the week, BTC's share was 51.1%, down 5.4% from 54.0% the previous week.
BTC price trends, coupled with volume data and the performance of specific altcoins, indicate that it adheres to the typical “buy the rumor, sell the news” pattern associated with major market events. Market participants predicted the ETF's approval 90% of the time and adjusted their portfolios accordingly prior to SEC approval.
During Q4 2023, BTC showed significant strength, with the price increasing by 57% to around $42,300 from $27,000 at the end of Q3. As BTC reached almost $49,000 after approval, investors took profits on positions initiated at lower BTC price levels and transferred their capital to altcoins, as evidenced by its decline in dominance over the past week. began to be redistributed.
This pattern is common and does not indicate a failed ETF launch. In the first two days of trading, the 11BTC Spot ETF closed with approximately $1.4 billion in cumulative inflows, partially offset by $600 million in outflows from the Grayscale Bitcoin ETF (GBTC). Net inflows were approximately $800 million.
The GBTC outflow was facilitated by the fact that it was not a new product launch, but rather a conversion from an existing Bitcoin trust holding over 600,000 BTC. Grayscale has higher management fees (1.5%) compared to most of its competitors (0.2%/0.3%), leading some investors to withdraw from Grayscale and opt for more favorable management fees. May reinvest in other BTC ETFs with fees.
Source: the-blockchain.com
