CEOs Corner: Navigating the post-spot Bitcoin ETF landscape

The recent US approval of 11 spot Bitcoin (BTC) ETFs by the SEC marked a significant milestone for the cryptocurrency market. It signalled a transformative shift in investor sentiment and market dynamics.

In these evolving markets, it is essential to analyse events, prevailing market sentiment and any indicators that have influenced the landscape in recent months.

Shift in market sentiment and volatility.

"Buy the rumour, sell the news" echoed through market trading following the ETF launch. However, market observers noticed shifts in sentiment indicators leading up to the event. From the end of October 2023, the CMC Fear and Greed index steadily moved into the Greed/Bullish territory, remaining there until January 19, 2024. This signalled heightened optimism and a bullish outlook among market participants.

Simultaneously, the Implied Volatility (IV) gauge, a critical metric for assessing market expectations, mirrored this sentiment. BTC options volatility surged in the latter half of the preceding year, peaking with the January announcement of the ETF. Post-launch, volatility subsided, reflecting a return to more stable expectations in the market. We’ve seen that return to a gradual climb in recent days.

The month following the ETF debut demonstrated a return to neutrality in various sentiment indicators. This stability was evident in both spot and derivative markets; a respite from the initial flurry of activity surrounding the ETF. It showcased the market's ability to adapt and find equilibrium in the face of significant developments.

IV is on the climb once more with BTC hitting US$50k this week.

BTC reached this price level amid the bull market three years ago. On February 4th 2021, BTC traded US$61 billion in 24 hours; on February 9th, 2024, US$26 billion. This rally is not solely driven by retail investors. It can be attributed it to the ETF impact, influenced by major players such as BlackRock and Fidelity. This signals a profound shift in Bitcoin and crypto trading.

2024 and beyond.

As we look ahead to 2024, BTC Markets data showed the market turned a corner in January 2023.Momentum has been with us since, in the subsequent 12 months. This is reflected in the return in client activity and influx of new investments onto the platform.

Looking beyond the present day, a gear shift in 2024 is anticipated, setting the stage for an extended run across 2025. The BTC halving is expected in April. This event has traditionally acted as a catalyst for bullish market trends in the subsequent months. BTC enters this next cycle at a significantly higher price point than previous years. Liquidity follows utility with increased ETF flows.

Caroline Bowler

CEO, BTC Markets

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