ETF Anticipation Ends in ‘Sell-the-News’ Slump for BTC, ETH Sees a Notable Boost: Glassnode

Bitcoin’s value dipped below $39,000 this week, erasing almost all gains made in the last two months, which were fueled by expectations of approval for a spot BTC ETF in the United States. But the introduction of the much-anticipated funds ended up being a classic “sell-the-news” event.

The term is a well-established concept in capital markets, illustrating how asset prices, leverage, and market sentiment work in tandem to drive prices upward, leading up to a positive event, only to see a subsequent decline.

Bitcoin ETF Approval Fizzles into ‘Sell-the-News’

From mid-October, the digital asset markets displayed robust performance, driven by ETF speculation and narratives surrounding capital rotation. Since BlackRock initially filed for its ETF, Bitcoin’s market cap has risen by more than 65%, with the overall altcoin market cap experiencing a similar increase of over 69%.

However, Ethereum has shown less bullish momentum, trailing the broader altcoin space by a decline of 17% over the same time frame, according to the latest estimates of on-chain intelligence platform Glassnode.

Looking at a broader perspective, Bitcoin was found to have steadily gained dominance over the past few years, growing from 38.9% to 49.8% since the FTX Collapse in November 2022.

In contrast, Ethereum has maintained its market cap dominance within the range of 18.9% to 18.2%. The decline in market share is notable among altcoins, dropping from 28.3% to 24.2%, while stablecoins also saw a reduction from 13.9% to 7.8%.

Ethereum’s Unexpected Rebound

Following the approval of the Bitcoin ETFs, several entities have either submitted applications or indicated a willingness to support the introduction of spot Ethereum ETFs. Securing approval for such a fund might present more challenges, as the SEC could view the leading altcoin more as an investment contract. The market sentiment, however, seems positive.

The prices of Ethereum have surged by over 20% compared to BTC in recent weeks, marking the most significant performance on a quarterly, monthly, and weekly basis since late 2022. This corresponds with a modest rebound in both the asset’s market cap dominance as well as the overall dominance of altcoins. Ethereum has gained 2.9% in market cap dominance compared to Bitcoin.

Simultaneously, there has been a notable increase in the volume of net profits secured by Ethereum investors, reaching a new multi-year high. While profit-taking has been on the rise since mid-October, the peak on January 13 surpassed $900 million per day, indicating investors capitalizing on the momentum created by the ‘sell-the-news’ scenario.

Glassnode observed a growing sense of optimism in the ETH market but also highlighted a potential point where markets typically pause to digest the distribution pressure from profit-taking. Historically, such shifts in sentiment among short-term holders have coincided with local peaks during a broader upward trend.

ETH investors have recorded a multi-year high in net realized profits, suggesting there is some willingness to sell-the-speculation on a potential ETH ETF capital rotation.”

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2024-01-25 22:12