Bitcoin Price Flashes $1.2 Billion Signal after Ethereum ETF Approval -Here’s What to Expect

Ibrahim Ajibade
Published: May 24, 2024, 10:57 GMT+00:00

Key Points:

  • Bitcoin (BTC) price tumbled as low as $66,411 on May 23, down 8% from its weekly peak, as investors reacted to Ethereum ETF approval verdict by the US SEC.
  • On-chain data shows that investors had moved 19,000 BTC into exchange wallets this week, likely in a strategic move to book profits after the approval verdict.
  • Technical indicators suggests that bulls must hold the $65,000 support to avoid losing over $1 billion in LONG liquidations.
Bitcoin Price action after Ethereum ETF Approval

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Bitcoin price dropped 8% from its weekly top to hit $66,411 on Thursday May 23 as crypto markets reacted to the US Securities and Exchange Commission (SEC) approving Ethereum spot ETFs. 

As speculations swirl surrounding the superior profitability of Ethereum ETFs over Bitcoin ETFs, will BTC price face more downward pressure in the days ahead?

Ethereum ETF triggers Bitcoin price downturn

Bitcoin price rose to a 60-day peak of $71,947 on Tuesday May 22, 2024 as positive speculations grew around the Ethereum ETFs approval. The 12% rally at the start of the week raised hopes that BTC could surge to new all-time highs above $75,000 after the approval verdict

But surprisingly, after the US SEC delivered the official approval verdict on Thursday evening, BTC price trend immediately took a downturn.

Bitcoin (BTC) Price Action after Ethereum ETF Approval
Bitcoin (BTC) Price Action after Ethereum ETF Approval

As seen above, Bitcoin price has tumbled 8% from the 40-day peak of $71,954 recorded on May 22, to hit $67,243 mark at the time of writing on May 24.

Bitcoin’s negative price action in the wake of SEC’s approval verdict feeds into the narrative that the Ethereum ETF funds could cannibalize on existing BTC funds.

Ethereum’s Proof of Stake (PoS) consensus protocol enables investors to earn additional non-speculative passive income, currently approximately 4% APY according to the official data from the beacon chain.

This could make Ethereum ETFs more attractive, especially for fund manages and custody services providers. If these entities prevail on their investors to switch from BTC ETF or diversify their portfolio, many Bitcoin ETF participants could convert large volumes of their BTC holdings into ETH in the weeks ahead.

Bitcoin Holders Shifted 19,000 BTC into Exchanges and Trading Wallets

Based on the scenario analyzed above many large institutional investors could look to diversify from Bitcoin ETFs into Ethereum ETFs in the coming weeks. Recent on-chain trends suggests many Bitcoin holders are already making strategic moves to front-run the potential bearish impact of that narrative.

CryptoQuant’s exchange reserves data shows the real-time changes in the number of BTC currently deposited in exchange-hosted wallets and trading platforms. An increase in BTC exchange reserves often occurs when investors are seeking out short-term selling opportunities, or wary of an imminent bearish catalyst, and vice versa.

Bitcoin (BTC) Exchange Reserves vs Price | Source: TradingView
Bitcoin (BTC) Exchange Reserves vs Price | Source: TradingView

Bitcoin investors held a total of 1,914,152 BTC in exchange wallets at the start of the week on May 20. But since Bloomberg analysts broke the news of the imminent Ethereum ETF approval by the SEC on May 20, there has been a considerable surge in the Bitcoin inflows across various crypto exchanges.

At the time of writing on May 24, investors now hold a cumulative balance of 1,932,021 BTC on exchanges and trading platforms. This implies that investors have transferred 17,869 BTC, worth approximately $1.2 billion into the short-term market supply within the last 3-days.

As some institutional investors look to diversify into Ethereum ETFs, more Bitcoin could flow into exchanges, flooding the markets and putting downward pressure on BTC prices.

In anticipation of this switch in large investors’ preferences many swing traders may also avoid going LONG on BTC in the near-term.

These factors could combine to create a prolonged trend of ETH price outperforming BTC as observed since the approval verdict.

BTC Price Forecast: Bulls under pressure to hold $65,000 support

Bitcoin price is currently trending at $67,200 at the time of writing on May 24, down 8% from its weekly peak. However the influx of $1.2 billion worth of BTC into exchanges puts Bitcoin price at risk of sliding below $65,000 in the near-term.

The Bollinger band technical indicator also support this bearish Bitcoin price outlook.

Bitcoin (BTC) Price Forecast | TradingView
Bitcoin (BTC) Price Forecast | TradingView

It shows that BTC price has now fallen below the upper-limit band of $71,330 which reflects a neutral market momentum. If investors flood the markets with more exchange inflows as observed since Ethereum ETF approvals became apparent on May 20, bulls could face significant pressure holding the $65,000 support.

But as depicted above, bulls could mount a major support buy-wall at the 20-day SMA price level at $64,949 to prevent massive liquidations. Failure to hold that support level could see BTC price fall as low as $58,566 in the near-term.

Conversely, if the Ethereum ETF approval spurs fresh investments into the crypto rather than cannibalizing BTC ETFs, Bitcoin could continue on its ascent towards new all-time highs above $75,000.

About the Author

Ibrahim Ajibade Ademolawa is a seasoned research analyst with a background in Commercial Banking and Web3 startups, specializing in DeFi and TradFi analysis. He holds a B.A. in Economics and is pursuing an MSc in Blockchain.

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