Good day everyone,
I hope you are all well and had an excellent week, welcome to CryptoGod-1’s blog on all things crypto. In this post I will be looking at the hype surrounding a potential Bitcoin price of $50,000 in January 2024 and how likely this is to happen yet. With the price of Bitcoin hovering around the $44,000 price at the time of writing, the difference of $6,000 would require a rise of %13.6 between now and the end of the month.
Bitcoin Pushing Towards ATH
Bitcoin achieved its all-time high of $69,044.77 on the 10th of November 2021 and currently sits about %36.5 off that figure. Looking at it's lifespan, from data on CoinGecko, the king of crypto has managed a steady growth since its heavy crash in November 2022 when FTX was declared bankrupt. In the past year alone Bitcoin has managed a growth of 161.8% with many anticipating further growth over the coming year with a full bull market expected later this year or into next year.
Over the past year, from the 2nd of January 2023 until the 7th of January 2024 Bitcoin saw its price rise from a low of $16,832.10 up to a high of $44,995 at the time of writing. The growth was not all liner of course, but saw a single Bitcoin rise in value by $28,162.90 over that period of time. Optimism has been growing in the market, with many feeling the damage from the FTX collapse has been navigated and with Binance having recently see its CEO Changpeng 'CZ' Zhao step down, the room for growth is clear in the market.
Back in early December 2023, with Bitcoin priced at $43,000, analysts were making predictions regarding the potential future price of Bitcoin. This was based on analysing Bitcoin’s user activity, using the Metcalfe price valuation band metric, considering factors like market capitalization, and transaction volume. A report was made by CryptoQuant which noted the potential price of Bitcoin in early 2024 should be around the $50,000 to $53,000 mark. At the time more than 88% of bitcoin’s circulating supply was in profit.
Given the heightened anticipation for the approval of a Bitcoin Spot Exchange-Traded Fund (ETF) many in the cryptocurrency community are keenly awaiting the SEC’s decision. Pressure has been mounting on SEC Chair Gary Gensler to approve the Bitcoin Spot ETF, with an expected impact on the price of Bitcoin to follow swiftly.
The rumours that surfaced in early January of the SEC not approving the Bitcoin Spot ETF saw around $600 million in liquidations from futures positions, along with open interest, or the number of unsettled futures contracts, falling by around $5 billion, the steepest drop in recent months. These rumours and analyst predictions have since been all but corrected in the market as the steady growth of Bitcoin continues.
$50,000 before 26th of January
When looking at the active Bitcoin options data, its shows the largest cluster of contracts outstanding are calls with a strike price of $50,000. These are set to expire on the 26th of January 2024, and there are more than 8,300 of these contracts. The notional value of these contracts sits at over $376 million. Why is this important?
Well, when considering options trading it is important to first of all understand how it works. A call option allows the holder the right, but not the obligation, to buy the underlying asset at a specified price before or on the expiration date. This means that at the time of writing there are more than 8,300 contracts for buying Bitcoin at $50,000 on or before the 26th of January 2024. This is extremely important as it suggests that a considerable number of traders anticipate the price of Bitcoin going above $50,000 by the end of the January expiration date. This is represented in the image below from Deribit.
Image: Deribit.
The data notes how a big focus on the $50,000 mark is visible across all expiry dates, with more than 21,800 contracts outstanding for calls at that strike price, with a notional value of $926 million. An even more expectant figure is below from Velo Data. It shows that the derivatives trading is pushing towards options for buying bitcoin at an even higher strike price. The data from multiple exchanges showed that the largest group of contracts were for call options at $60,000, with these also due to expire on the 26th of January 2024.
Image: Velo Data.
As noted above, the recent drop in price for Bitcoin saw it fall towards the $40,000 mark but by Friday the 5th of January 2024 it had pushed right back up to the $44,000 price point. Markets had reacted to analyst reports but are now focused on the expected announcement(s) from the SEC regarding a Bitcoin Spot ETF. Major altcoin tokens such as Solana (SOL), Ether (ETH), and Cardano (ADA) also saw large drops in price during the furore, but have also began to stabilise since.
The dump, which happened on Wednesday the 3rd of January 2024, all began when research firm Matrixpost noted that it expected "the SEC to reject all proposals in January" in regards to a Bitcoin Spot ETF, while options analyst GreeksLive noted that "weakness in crypto mining stocks, and the sell-off in several crypto-related U.S. stocks" had reinforced the market's overall sceptical view.
An opposite view was taken by Yield App's Kiely, who noted that these rumours of the SEC failing to approve a Bitcoin Spot ETF in January 2024 should be ignored.
"I think it’s still likely that we see an approval from the SEC in January. There is too much pressure and expectation from the world's biggest asset managers for Gary Gensler [chair of SEC] and the rest of the approval committee to keep kicking the can down the road."
However he also noted it could be the catalyst for a massive 'sell-the-news' event, which has been predicted by some. The likes of CryptoQuant has since updated their predictions and are now forecasting a drop in the price of Bitcoin to as low as $32,000 following the potential approval of a Bitcoin Spot ETF. This is because of analysis which states that unrealized profits are currently lingering at a level that historically precedes a so-called correction. This correction has historically been a decline of around 10% in the cryptocurrency space, but it can and has been more. Kiely noted:
"I don’t expect to see a massive sell-the-news event as some have predicted. Rather than falling as low as $32,000, I think that bitcoin will take $50,000 by the end of January and we will see a record print of BTC this year."
The "Sell the news" mantra is a well known term in capital markets as it describes how asset prices, leverage and sentiment run up in the lead up to a bullish event. The prices then tumble shortly afterwards due to astute traders turning the market and ensuring those who have over-hyped and crowded the long trade become trapped. Those with leverage are forced to close their position or get liquidated. A Bitcoin Spot ETF approval would be considered a bullish event, and could easily see a large drop in price to the $32,000 level.
Bitcoin has risen over 60% since ETF mania began a few months ago and everyone is focused on the 10th of January 2024 as decision day. Historically "sell the news" events have been common for Bitcoin, with the asset topping out at $20,000 after the CME listed BTC futures in 2017. Similar happened in 2021 when Coinbase completed its IPO and Bitcoin peaked at around $69,000. Both of these events were followed by large drops in price and users should anticipated similar with a Bitcoin Spot ETF approval.
The above tweet by @dan_pantera explains exactly how Bitcoin rose by astronomical levels when previous "Sell the news" events happened, along with the huge downturns in the months and even year(s) following. Its an important lesson to learn and understand, and for anybody looking to stock up their bags, placing a sell on your current holdings of Bitcoin at around the $50,000 mark to then reinvest a month or so later at $32,000 could be a nice little earner. Food for thought.
Have a great day.
Peace. CryptoGod-1.
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