Along with Bitcoin's more than 5% drop to $42,736 since the introduction of cash Exchange-Traded Funds (ETFs) in the United States on Thursday, analysts from 10x Research warned that a "sell the news" strategy may be taking place.
Markus Thielen has issued a cautionary note, recommending that selling may continue in the near term, with the potential to reach the support level of $38,000.
Bitcoin's price drop comes on the back of high hopes for huge inflows following the approval of cash ETFs. Bitcoin initially surged above $49,000 and is also the 2-3 year average price level for investors, which is often considered resistance.
Technical analysis conducted by 10x Research shows the divergence of weakness symbolized by Bitcoin's Relative Strength Index (RSI). The RSI divergence, along with a decline of more than 5%, raises concerns of a correction in the market. The Moving Average Convergence Divergence (MACD) histogram crossing below zero also supports a bearish shift in momentum.
The report also draws attention to historical data, noting that BTC has undergone significant corrections after significant events such as the launch of Bitcoin futures in December 2017, the listing of Coinbase in April 2021, and the cash ETF in October 2021. Analysts from 10x Research recommend that this historical pattern indicates the possibility that the market is starting to lose interest.
Thielen also noted that investors in Grayscale's ETF, the former Grayscale Bitcoin Trust (GBTC), shifting to lower-fee options may be contributing to downward pressure on Bitcoin's price. While Grayscale has a management fee of 1.5%.
Thielen emphasized that Grayscale's decision to bet that investors will gradually move away from their higher fee offerings may have an impact on Bitcoin's value. Additionally, he highlighted concerns for Grayscale and its parent company, DCG, citing negative news and a history of charging GBTC holders a management fee of 2.0%.
According to 10x, investors will most likely divest their Bitcoin holdings before switching to a different ETF provider, this indirectly results in an impact on the price of BTC and creates ongoing concerns.
