Previous significant Wall Street launches of Bitcoin-related goods were followed by multi-month price drops.
With the listing of ProShares Bitcoin Strategy (BITO) on the New York Stock Exchange on Oct. 19, Wall Street welcomed the first Bitcoin (BTC) exchange-traded fund (ETF). On its first day, the fund drew more than $1 billion in trading volume, with Bitcoin’s price rallying to a new high of $67,000.
The spot gains, however, did not last long, as BTC pared some of its gains heading into the weekend.
On Saturday, Bitcoin’s price fell over 11% from its all-time high to below $60,000, prompting concerns about selloffs that normally occur after the launch of big crypto derivatives products on Wall Street.
Analysts predict a larger BTC correction
Nunya Bizniz, an independent market analyst on Twitter, recalled two such important events: the debut of the crypto trading firm Coinbase’s stock (COIN) on the Nasdaq stock exchange and the listing of the first Bitcoin futures on the Chicago Mercantile Exchange (CME).
Notably, CME debuted its Bitcoin futures product on December 18, 2017, the same day that Bitcoin hit a new high of around $20,000 for the first time. However, the introduction coincided with the start of one of Bitcoin’s longest bear cycles, which peaked at about $3,200 a year later.
Similarly, COIN’s Wall Street debut on April 4, 2021, coincided with Bitcoin’s rise to a new all-time high of nearly $65,000 just 10 days later. Despite this, the upward trend was greeted with a series of sharp selloffs, pushing BTC to correct to as low as $28,800.
In addition, Dan Morehead, Pantera Capital’s CEO and co-chief investment officer, said in a newsletter earlier this month that he “may want to take some chips off the table” ahead of the Bitcoin ETF’s introduction.
The Bitcoin ETF has had a strong start
Despite the historically adverse sentiment associated with high-profile Wall Street crypto listings, some analysts anticipate the Bitcoin ETF’s strong start will result in modest downside moves in the spot BTC market.
According to the Financial Times, Todd Rosenbluth, head of ETF and mutual fund research at CFRA, ProShare’s $1 billion debut is “a sign of the pent-up demand” among traditional financial businesses wanting to get a piece of the growing crypto market.
Retail traders accounted for only 12–15 percent of net inflows into BITO on the first two days of trading, according to JPMorgan Chase.
This indicated that institutional investors are interested in Bitcoin ETFs, as cash-marginated Bitcoin futures open interest has risen by up to 79 percent month-to-date, and CME basis has risen from negative in July to above 16 percent this week.
Noelle Acheson, head of market research at crypto trading firm Genesis, noticed that Bitcoin’s perpetual futures rolling basis, a metric for gauging leverage demand, increased somewhat but remained at 13.08 percent, down from 34.6 percent in mid-April.
High leverage has been a recurring theme in recent spot BTC market corrections. In other words, the current neutral funding rates signal that the risk of a large downturn is minimal.
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