To The Moon

Previous landmark events such as Coinbase's stock exchange listing and ProShares' futures-based bitcoin ETF debut happened near market tops.

We have seen how bitcoin crypto miners stocks went down with $Marathon Digital Holdings Inc(MARA)$ dropping more than 15%. The massive hype over the bitcoin ETFs approved this week gave way to a massive rout.

At the time of writing, Bitcoin had been going down below $42,000, after we saw Bitcoin go up as high as $46,000 earlier Friday and surged to a two-year high of $49,000 on 11 Jan (Thursday), when bitcoin ETFs began trading in the U.S.

Shares Of Custodian - Coinbase (COIN) - Loses More Than 7%

$Coinbase Global, Inc.(COIN)$ which provides vital custody services to 8 out of 11 ETF issuers, its shares lost 7.35% on 12 Jan (Friday) Close. Hut 8 Mining Corp (HUT) , $Riot Blockchain, Inc.(RIOT)$ all lost at least 10%.

The declines happened one day after spot bitcoin exchange-traded funds (ETFs) began trading, marking a significant milestone for the industry. Bitcoin ETFs are traditional financial vehicles that may give retail and institutional investors alike easier exposure to bitcoin's price.

Actually analysts and research firm have been anticipating decline after the ETF approval, cited it as a "sell the news" event. But as investors, I think it is important for us to look out for opportunities and see what would happen to Crypto Stocks after the ‘Sell the News’ rout ended.

In this article, I will be exploring past listing events of Coinbase and ProShares Bitcoin Strategy ETF (BITO) in 2021 and see if we could find similar patterns or clues of when the rout might end, and how crypto stocks could rally, to what extent?

What will happen to Bitcoin price as Coinbase goes public?

Previous landmark events such as Coinbase's stock market listing in April 2021 happened near a significant peak in crypto prices, possibly foreshadowing cooling prices ahead.

Bitcoin have continually surged toward record highs, causing the futures market of Bitcoin to see a substantial increase in volume and open interest.

The term “open interest” refers to the total sum of active trades in the Bitcoin derivatives market. The open interest of the Bitcoin futures market is hovering at historic highs, currently $27.43 billion.

Following the Coinbase listing, traders and investors generally anticipate the uptrend of Bitcoin and Ether to continue. But there are also short-term bear cases due to various factors such as a potential “sell-the-news” scenario and an overheated futures market.

Despite the price of Bitcoin hovering at an all-time high, the relative strength index is lower than where it was during the 2017 peak of the previous bull run. When the price of Bitcoin violently dropped in a short period, its RSI was at around 95. Currently, the RSI is at 92, which is lower than the tops of both the 2017, 2013 and 2011 rallies.

On-chain data also suggests that Bitcoin is in a favorable position to see a broader rally. Elias Simos, protocol specialist at Bison Trails, said that the supply of Bitcoin among addresses that hold 100 to 1,000 BTC has hit an all-time high. This indicates that the number of high-net-worth investors holding Bitcoin is increasing.

Bear case following the Coinbase listing

The primary bear case surrounding the Coinbase listing remains the high probability of a “sell-the-news” drop in the cryptocurrency market. Atop this, there is a chance that buyers will rush into COIN, possibly selling Bitcoin, Ether and other major cryptocurrencies in the process.

Mohit Sorout, partner at Bitazu Capital, also emphasized that he believes the final leg of the Bitcoin bull market is approaching, based on historical trends. He said, “Truth be told I seriously think we’ve entered the final leg of this $btc bull market. To be clear, final leg could be 2-3 weeks or even more. Price could reach 200k or even more who knows. Just don’t make irrational life decisions based on unrealized Profit and Loss.”

On top of the possibility of a peak approaching for the cryptocurrency market, the funding rate of the Bitcoin futures market is at around 0.11% on average. The default funding rate of Bitcoin is 0.01%, so this is 11 times higher. Hence, the likelihood of a flush correction in the short term remains relatively high.

Notably, previous landmark events such as Coinbase's stock market listing in April 2021 and ProShares' futures-based bitcoin ETF (BITO) debut in October 2021 happened near a significant peak in crypto prices, possibly foreshadowing cooling prices ahead.

What Happen After Proshares Bitcoin ETF (BITO) Listing

Launched in October 2021, BITO reached more than $1 billion in assets by the end of its second trading day. As of Sept. 30, the ETF, which invests in bitcoin futures – not in bitcoin directly – ranked as the world's largest bitcoin-linked ETF, according to a fact sheet available on ProShares' website, which cited Bloomberg data.

BITO has attracted $438 million in net inflows this year through Nov. 24, according to information provided by ProShares. The two weeks ended Nov. 10 accounted for more than half of those net inflows as $224 million poured in, the most of any two-week period since the start of 2022.

During the two weeks ended Nov. 10, $2.7 billion worth of BITO shares traded, the third-highest of any two-week period for the ETF in terms of dollar volume since the start of 2022, ProShares said.

ProShares manages $68.1 billion in total AUM as of Nov. 28, including $64.5 billion in ETF assets.

Bear case following the Spot Blockchain ETF Listing

If we looked at how the supply have moved with Bitcoin price in the 100 to 1000 (termed as sharks) investors, there is hardly any huge movement, unlike in the case for Coinbase listing.

But we should not rule out as we could see that in 2021 and 2022, Bitcoin has an exponential rise in price.

Current RSI For Bitcoin (as of time of writing)

In 2021, when the price of Bitcoin violently dropped in a short period, its RSI was at around 95. Currently, the RSI is between 40 and 60, which is much lower than the tops of both the 2017, 2013 and 2011 rallies.

While there might not be any drastic in Bitcoin prices, but we could expect some correction from Bitcoin prices. I would be monitoring and see if Bitcoin can clear the 70 level first, before we see Bitcoin going back to above $45,000.

Summary

Based on what I have gathered and looking at the past events from 2021, while the ‘sell the news’ event happen, it would last for quite a period, before we see investors returning to push back the price of Bitcoin and hence, this would help to push the price of crypto stocks, etfs.

As investors, I personally think that we should be monitoring the Bitcoin RSI, the supply of Bitcoin’s sharks defined as wallets holding between 100 and 1000 BTC, as I have found out that when they own over 66% of Bitcoin’s circulating supply, Bitcoin prices tend to be at its highs.

I would be monitoring and start accumulating for better potential and profits later.

Appreciate if you could share your thoughts in the comment section whether you think ‘Sell the News’ rout would last for some time, before we see Bitcoin and related crypto stocks and ETFs recovering.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.

$ARK 21Shares Bitcoin ETF(ARKB)$ $iShares Bitcoin Trust(IBIT)$