Bitcoin, Ethereum, Dogecoin In Red As GBTC Bleeding Continues: Analyst Says Massive Correction For King Crypto Is On The Cards

Major cryptocurrencies continued to drop on Tuesday evening as institutional sales linked to recently launched exchange-traded funds (ETFs) continued to exert downward pressure on BTC.

What Happened: Recent selling pressure on Bitcoin has been linked to sales from the FTX bankruptcy estate, which has offloaded around 22 million shares of Grayscale's GBTC in the past few weeks. 

On-chain analysis firm CryptoQuant was one of the few to speculate that the ETF approval would culminate in a “sell-the-news” event. The term “sell the news” is a familiar concept in capital markets, illustrating how asset prices, leverage, and sentiment drive prices higher prior to a bullish event, only for prices to decline shortly thereafter.

Since its conversion to a spot Bitcoin ETF on Jan. 11, GBTC has experienced over $3.4 billion in outflows. Grayscale subsequently deposited billions in Bitcoin to crypto exchange Coinbase Prime, likely for sale.

Bloomberg ETF analyst Eric Balchunas reported an outflow of $515 million on Jan. 23, resulting in a 13% reduction in shares outstanding. However, he noted that the latest data indicates a potential slowdown in the outflow.

The recent outflows have been linked to defunct crypto exchange FTX, which reportedly sold two-thirds of 22.3 million shares in GBTC over three days of trading. FTX is believed to still hold around 8 million shares, worth approximately $281 million, yet to be sold.

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The global cryptocurrency market cap now stands at $1.56 trillion, showing a 3.40% decrease in the past 24 hours.

The S&P 500 rose by 0.29% to reach 4,864.60, marking a new record high at the close of trading. Simultaneously, the technology-focused Nasdaq Composite surged by 0.43% to reach 15,425.94.

Additionally, traders are eagerly anticipating the release of two pivotal economic indicators later this week. Firstly, the preliminary fourth-quarter gross domestic product figures are scheduled for Thursday, followed by the highly anticipated personal consumption expenditures price index for December from the Commerce Department on Friday.

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Analyst Notes: Cryptocurrency analyst Michael Van de Poppe has remarked that Bitcoin has hit the range low.

"Hit entries already, looking to add some more on the markets. Dips remain for buying."

Cryptocurrency analyst Benjamin Cowen suggests that Bitcoin is on the brink of entering a corrective phase, as the leading cryptocurrency hovers around the $40,000 mark. Cowen notes that historically, the pre-halving correction often entails Bitcoin’s decline to test the 100-week simple moving average (SMA).

"You can say, ‘Well, we only tested it because of the pandemic,' but it's happened to every cycle. And we even fell below it. Forget testing it. We went to the 100-week SMA and then we proceeded to fall another 45% from there last cycle… Guess where that would put you today? A 45% drop below the 100-week SMA [at $28,176], that would put you back at the prior low [at $15,355]."

Santiment, an on-chain analytical firm, has reported that Bitcoin Cash and Loopring are currently being actively shorted on Binance following a substantial decline in the crypto markets this week. . "They are already showing signs of bounces, and short liquidations would only act as rocket fuel if markets recover."

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