Bitcoin (BTC) bulls are looking to reclaim some lost ground on Wednesday after the top crypto hit a low of $38,500 on Tuesday, which represents a 21.5% fall from its recent high of $49,100 set on Jan. 11, the day spot BTC exchange-traded funds (ETFs) launched on U.S. markets.
Data provided by TradingView shows that bulls have managed to push BTC price back to support/resistance at $40,000, and are now locked in a battle with bears for control of the price action.
BTC/USD Chart by TradingView
The early gains on Wednesday resulted in February Bitcoin futures prices trading “firmer on a corrective bounce after hitting a seven-week low Tuesday,” according to Kitco senior technical analyst Jim Wyckoff, who said that “bears have the slight overall near-term technical advantage.”
Multiple factors are aiding bears in their efforts to push Bitcoin’s price lower, with the most significant being sales by Grayscale, which has been liquidating large amounts of BTC since the ETFs launched as traders book profits or rotate into an ETF with a lower fee structure.
Grayscale’s GBTC ETF currently charges a fee of 1.5% while the other asset managers charge fees of 0.2-0.3%. This has led many GBTC holders to request redemptions, forcing Grayscale to sell BTC on the open market to recoup the funds to send to clients. Many of these investors have reinvested other spot BTC ETF options, while others have kept the cash.
According to Bloomberg Intelligence ETF analyst James Seyffart, at the end of trading on Tuesday, GBTC had seen a total of $3.96 billion in outflows since being converted to an ETF.
Update for the #Bitcoin ETF Cointucky Derby.
$515 million came out of $GBTC yesterday for a total of $3.96 billion in outflows since converting to an ETF. Newborn 9 saw +$409 million flow in. Net outflows in total for yesterday were -$106 million. pic.twitter.com/gzymMHHua8— James Seyffart (@JSeyff) January 24, 2024
Data compiled by Arkham shows that Grayscale has moved a total of 113,000 BTC from its wallet, mainly to Coinbase Prime, in preparation for sale. As of Wednesday morning, Grayscale’s website showed GBTC as holding roughly 537,000 bitcoin, down about 100,000 BTC since Jan. 11.
While the other products have made up for the majority of outflows from GBTC, they have not captured all the recent BTC sales, which has put negative pressure on Bitcoin’s price.
"The outflows are usually split between Coinbase Prime and new GBTC custody addresses," said Arkham. "This means that not all of the BTC moved is being redeemed. The outflows appear to be settlements of trading activity for the previous day(s)."
Bankrupt crypto exchange FTX has emerged as a major source of GTBC sales as the FTX estate dumped 22 million shares worth close to $1 billion in recent days, taking the firm’s GBTC ownership down to zero. The sales come as FTX is looking to distribute payouts to creditors as the bankruptcy process winds down.
While many expected the selling to subside and Bitcoin’s price to stabilize after the FTX sales, a new threat to BTC emerged on Tuesday: the potential release of the Mt. Gox Bitcoins.
The Tokyo-based Mt. Gox exchange was once the largest crypto exchange in the world before it ceased operations and filed for bankruptcy in 2014 after a hack that resulted in the loss of 850,000 Bitcoins.
After years of restructuring, the platform is now ready to start paying back its creditors, with some receiving funds via fiat, while others have elected to receive BTC payouts. On Tuesday, reports began circulating on social media that the exchange was sending emails to creditors verifying their BTC wallet address – a sign that the distribution of funds is about to commence.
This process is part of the civil rehabilitation plan that was approved by the Tokyo District Court in 2018. The repayment plan involves the distribution of the remaining 150,000 Bitcoins (worth approximately US$6 billion) to creditors.
The threat of large sales by Mt. Gox creditors has hung over the crypto market for years, and the distribution comes at a delicate time for the market, which is in correction mode following the substantial gains witnessed in 2023.
While the Mt. Gox Bitcoins have yet to be distributed, it has been a long-running concern that recipients will dump their tokens on the open market to capture the price gains that have occurred since the exchange was hacked, when Bitcoin traded for $450. Additional selling at this point could see Bitcoin trade into the low $30,000s, some analysts have warned.
Blockstream CEO Adam Back took to X on Wednesday to push back against these concerns, saying they were merely the latest FUD (fear, uncertainty, and doubt) trying to drive Bitcoin lower.
and note @mtgox is paying out in BTC and kept the BTC (not sold for bankruptcy legal expenses), they did not sell them to USD unlike the US bankruptcy approach of @FTX_Official. or creditors would be even sadder with $450 *0.2 = $90/btc rather than 20% of bitcoin balance.
— Adam Back (@adam3us) January 24, 2024
Never ones to let a good conspiracy theory go unexplored, many in the crypto space have noted the confluence of factors that seem to be coalescing to drive Bitcoin’s price lower.
Now everyone is turning bearish which is exactly what they want. The timing with FTX, GBTC now MT. Gox. I wouldn’t be surprised if the US gov announced they are selling their BTC. It’s all engineered so most of BTC switches hands to Blackrock and company at a discount.
— Nacho Gerberg | Aston King (@Nachogerberg) January 23, 2024
But many experienced traders and crypto enthusiasts maintain the position that nothing goes up forever, and the ETF hype that pushed Bitcoin from around $24,700 in June 2023, when BlackRock filed their spot BTC ETF application, all the way to $49,000 on Jan. 11, would be followed by a notable correction.
According to multiple analysts, Bitcoin is no stranger to 20-30% corrections during bull market run-ups, so this is nothing new for the crypto community, and could represent a good buying opportunity ahead of the next leg up for the crypto market.
“The average ‘respectable’ correction in a bull market is 30%,” said Ran Neuner, founder of Crypto Banter. “We are 20% down already and there may be 10% left to go… You’re not going to catch the bottom and if you miss the run up you will kick yourself! My theory, start buying now. If we go down to $34k, buy all the way down. But don’t miss the pump!”
This sentiment was echoed by MN Trading founder Michaël van de Poppe, who posted the following chart highlighting a possible entry at the range low of $36,000.
#Bitcoin approaching the range low for the coming period.
This is the dip you're looking for to get yourself positioned into the markets.
It's not going back to $12K, but a standard 20-30% correction is taking place. pic.twitter.com/nu7w13OKrF— Michaël van de Poppe (@CryptoMichNL) January 19, 2024
