Bitcoin May Retrace From $60K Following An ETF Launch
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Bitcoin May Retrace From $60K Following An ETF Launch

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Although only a futures Bitcoin ETF, the announcement is still an investor milestone, which could lead to the second leg of the BTC bull run. Nonetheless, having a viable profit-taking strategy to know when to exit the market is critical in periods of market euphoria.

Bitcoin ETF Rumor Mill Stronger than Usual

In the last 24 hours, the media has been abuzz with the rumors of an imminent futures Bitcoin ETF approval by the Securities and Exchange Commission (SEC). This wave of enthusiasm came on the heels of an official SEC ed. tweet, warning investors to weigh the cons and pros of futures contracts.

While this tweet implies that a futures Bitcoin ETF is about to be launched, the SEC has made such educational notices before without any direct action following them. Nonetheless, this time it appears the rumors are true. According to Bloomberg’s James Seyffart, the data team is adding ProShares Bitcoin ETF under the ticker $BITO.

ProShares is a US-based ETF specialist under the ProFunds Group, with over $57 billion in assets under management (AUM), currently headquartered in Bethesda, Maryland. ProFunds Group was funded by Louis Mayberg and Michael Sapir in 1997 with just a $100k initial investment.

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What to Expect When a Bitcoin ETF Launches?

If ProShares is the only BTC ETF to launch within days, the company is expected to have a first-mover advantage. We had seen this happen previously with the top 5 Canadian Bitcoin ETFs, when Canadian Purpose Bitcoin ETF (BTCC) launched first, which still holds the highest asset value to this day.

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Another important issue to consider is that these upcoming Bitcoin ETFs are future-based. Because they are derivative speculations, investors will not in fact hold BTC in their wallets. However, this means that futures are ripe for exploiting the market by sending out market signals. We have seen this happen previously when futures contracts launched on the world’s largest futures exchanges, the CME Group.

While it is still debatable to what extent it contributed to it, the CME Bitcoin futures coincided wtih BTC price drop in December 2017 due to speculation and betting against BTC price rising. With that said, we are a long way from 2017. The number of institutional players holding BTC has grown immensely, not to mention that Bitcoin’s market cap is over three times larger.

Bitcoin’s Price Moves After Bitcoin ETF

Predictably, without even an official confirmation, the rumor mill around Bitcoin ETF made BTC price break the $60k resistance, soon followed by retracement and back up again. When it comes down to it, we are dealing with a “buy the rumor, sell the news” situation. For instance, you may have noticed that when there is a rumor that a certain altcoin is to be listed on a major crypto exchange, its price gets pumped, only to drop soon after.

While Bitcoin is no altcoin, we are dealing with a similar dynamic. The Fibonacci extension indicator is a very useful tool to have in this situation. It establishes zones of price heights and pullbacks. From this, it logically follows that we can reasonably plot which price level is the optimal one to exit the market and take the profit.

Fibonacci zones have a good track record of indicating the price pullback level. Image credit: TradingView

When we compare Fibonacci zones between 2017 and today, we can see that Bitcoin’s current upper range is around $65k. Above that is an uncertainty zone. Bitcoin price may even go up as far as $120k by the end of the year, but anything above $65k should be taken with a grain of salt.

However, it is very likely that continued inflation and money printing will fortify Bitcoin’s appeal and accelerate its adoption rate. After all, just yesterday, President Biden signed the law to temporarily lift the debt ceiling.

Therefore, it is likely that Bitcoin price will break new ATH records in the upcoming months, but one has to account for a return of the bear market near the end of the year.

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Now that the perpetual China FUD has been neutralized, do you think some other external factors can still bring the BTC price unexpectedly down? Let us know in the comments below.

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