Why Did Bitcoin and Cryptocurrencies Weaken? The Impact of Bitcoin ETFs Might Be Over!

• After the listing of Spot Bitcoin ETFs, the crypto market experienced a significant pullback, with the market cap dropping from $1.82 trillion to $1.66 trillion.
• Trading volumes among cryptocurrencies have been negatively affected due to volatility, the earnings season, and macro factors.
• BTC’s volatility level hit the lowest point of the past month, showing significant declines in both large futures volatility (RV) and IV, dropping below 45 for short-term IV.

Bitcoin and cryptocurrency prices continue to show weakness on Thursday: Could the effect of ETFs have dissipated?

Ending the Hype of Spot Bitcoin ETFs

After the listing of Spot Bitcoin ETFs, the crypto market experienced a significant pullback, with the market cap dropping from $1.82 trillion to $1.66 trillion. Altcoins like Ethereum have rebounded as Bitcoin dominance fell below 50%. The price of Bitcoin remained sideways around $42,500 throughout the week, and traders are attempting to accumulate below $40,000, but experts predict that the short-term effects of Bitcoin ETF approval have largely come to an end.

Trading volumes among cryptocurrencies have been negatively affected due to volatility, the earnings season, and macro factors. The strong U.S. dollar creates selling pressure on Bitcoin. The U.S. Dollar Index (DXY) reversed, rising from 101 to over 103.50 at the beginning of January.

However, Coinglass data and the latest macro data indicate that the selling pressure on Bitcoin is gradually decreasing. In the last 24 hours, the crypto market saw liquidations totaling more than $100 million, with 75% coming from long positions and 25% from short positions. Liquidations of $22 million in Bitcoin and $20 million in Ethereum were recorded. However, the trend is changing, as short position liquidation has increased in the last 12 hours.

BTC’s volatility level hit the lowest point of the past month, showing significant declines in both large futures volatility (RV) and IV, dropping below 45 for short-term IV. According to futures and options data, the short-term impact of the Spot Bitcoin ETF seems to have largely ended. The funding rate looks attractive for traders, and buying is likely to start soon. Open positions (OI) for BTC futures and options have increased again in the last 4 hours. OI in BTC on exchanges like CME, Binance, and Coinbase is rising to $18.31 billion, a 0.35% increase in total BTC futures open interest.

In contrast, Ethereum open interest (OI) has decreased by more than 2% in the last 24 hours, falling to a total ETH OI of $8.85 billion. However, Solana and XRP OI are increasing again, suggesting that prices may soon make a comeback.

Bitcoin and Cryptocurrencies Hold Promise for the Future

A popular analyst stated that the cyclical nature of risk-weighted returns promises hope for Bitcoin in the next 12-18 months. If historical models come into play, holding BTC until 2026 after the 4th halving could be very optimistic. Renowned analyst and trader Michael van de Poppe said, “People have bears and a negative view on Bitcoin. Don’t be like that. Buy at the bottom and hold.”

The current price of BTC is $42,530. The 24-hour low and high values are $42,189 and $42,880, respectively. Trading volume remains low before the close of futures trading on Friday. The gaining momentum of Bitcoin’s rise, coupled with the first sign of a decrease in Ethereum open interest, will bring a withdrawal in altcoins.