Bitcoin traders are facing a challenging time as the recent sell-off in the market has left them disappointed, with newly launched spot Bitcoin exchange-traded funds (ETFs) failing to deliver the anticipated price surge.
Adding to their concerns, the steady outflows from the Grayscale Bitcoin Trust (GBTC) have been putting downward pressure on the Bitcoin price.
To make matters more complex, there is a strong resurgence of the U.S. dollar, compounding the challenges for market participants.
The U.S. Dollar Index (DXY), a gauge of the dollar’s performance against major foreign currencies, has shown a remarkable recovery, surging by 2.71% from its low of 100.617 on December 27th.
This resurgence has been fueled by positive economic data from the United States, including robust retail sales, an upbeat Philly Fed Manufacturing Index, and a decline in weekly initial jobless claims.
Consequently, the DXY has reached new highs in the range of 103.65 to 103.70 in 2024.
December 2023 retail sales, as reported by the U.S. Census Bureau, exceeded expectations with a growth rate of 0.6%, surpassing the anticipated 0.4% and the previous period’s 0.3%.
Moreover, the dollar’s recovery can be attributed to an increase in U.S. yields, driven by diminishing expectations of an imminent interest rate cut by the Federal Reserve.
From a technical perspective, the U.S. Dollar Index appears poised for a further ascent, potentially exceeding 1.12% due to the formation of a V-shaped recovery pattern.
If the DXY manages to breach its neckline at 104.56, the likelihood of an extended recovery towards 107 in the coming months is on the horizon.
Meanwhile, the massive outflows from GBTC have significantly impacted the Bitcoin price since the launch of spot Bitcoin ETFs on January 11th.
Grayscale has liquidated a substantial portion of its Bitcoin holdings within GBTC, with nearly 38,000 BTC leaving since the conversion to a spot ETF on that date.
On January 12th alone, there were outflows totaling $484 million from Grayscale, as GBTC holders exercised open redemption options.
Notably, despite the approval of spot Bitcoin ETFs, economist Peter Schiff believes that the Bitcoin price has not surged due to the outflows from Grayscale’s GBTC product.
He argues that while total inflows were substantial, their impact on the overall BTC market has been limited.
In terms of price analysis, independent market analyst Ali suggests that Bitcoin has been moving within an ascending parallel channel since late 2022.
He attributes the current correction to a rejection from the upper boundary of the channel at $48,000 and predicts a retracement to the lower boundary at $34,000.
Nevertheless, market intelligence firm Santimet remains optimistic about the long-term impact of spot Bitcoin ETFs.
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They acknowledge that the approval news may have contributed to a localized crypto market peak, as many experts believed that the approvals were already factored into market prices at the time of the announcements.
