The bitcoin market is bracing for a bout of volatility as two significant developments send mixed signals to investors. On one hand, US-based Bitcoin ETFs have witnessed a record $680 million in daily outflows, marking a sharp reversal from the previous influx of investor capital. On the other hand, the United States Securities and Exchange Commission (US SEC or the Commission) has given the green light to the first spot Bitcoin and Ethereum ETFs, which could pave the way for increased institutional investment. As these two forces collide, traders and investors are left wondering: what’s next for bitcoin price?”
Bitcoin price performance mirrors past cycles despite changing dynamics.
Despite the evolving market structure, bitcoin price performance in 2024 bears a striking resemblance to its 2015–2018 and 2018–2021 cycles. According to Glassnode’s weekly report, bicoin’s surge above $100,000, with yearly returns exceeding 130%, has been accompanied by relatively low selling pressure.
This cycle has seen the least volatility since Bitcoin’s launch, with most drawdowns limited to 25% below local highs. Analysts attribute this reduced volatility to heightened institutional interest and the introduction of spot Bitcoin ETFs, which have driven demand and helped bitcoin breach the $100,000 mark.
Notably, long-term holders have consistently realized profits of $2.1 billion per day, yet demand has remained strong, with buyers injecting an estimated $2.1 billion in fresh capital into the market daily. Glassnode analysts suggest that new market entrants, particularly those who acquired bitcoin within the past six months to a year are driving most of the recent sell-side pressure.
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Unprecedented outflows from Bitcoin ETFs spark volatility concerns.
Investors withdrew a record $680 million from bitcoin ETFs on Thursday, marking the largest single-day outflow in the history of exchange-traded funds tracking the cryptocurrency. This massive sell-off has raised concerns about bitcoin price stability.
The outflows were triggered by the Federal Reserve’s revised outlook for interest rates in 2025, which sparked a broader sell-off in risk assets. Bitcoin price plummeted 5% to around $96,000 on Friday morning, intensifying volatility fears.
This record outflow from bitcoin ETFs underscores the growing selling pressure among traders, which could further exacerbate bitcoin price fluctuations.
The US SEC’s approval of new spot bitcoin funds has failed to alleviate market concerns, as regulatory uncertainty continues to plague Bitcoin investors. On January 10th, the Commission gave the green light for the listing and trading of spot Bitcoin exchange-traded product (ETP) shares. However, this move has not calmed market jitters, as investors remain wary of the regulatory landscape.
Historically, the Commission has disapproved over 20 exchange rule filings for spot Bitcoin ETPs since 2018, including one filed by Grayscale. However, a court ruling changed the circumstances, with the U.S. Court of Appeals for the District of Columbia vacating the Commission’s disapproval of Grayscale’s proposed ETP.
Despite this, the Commission has taken a neutral stance, evaluating rule filings based on their consistency with the Exchange Act and regulations. The Commission’s primary concern is protecting investors and the public interest, rather than taking a view on specific companies or investments.
In essence, the SEC’s approval of new spot bitcoin funds is a step forward, but regulatory uncertainty still lingers, leaving investors cautious and uncertain about bitcoin’s future.
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Bitcoin’s Vulnerability to Market Fluctuations Exposed
Record outflows from US-based Bitcoin ETFs have highlighted the cryptocurrency’s susceptibility to market volatility. Meanwhile, MicroStrategy’s ambitious plan to raise $42 billion in three years to finance its Bitcoin buying spree has raised questions about the sustainability of its approach.
MicroStrategy’s bold strategy has captivated investors, but concerns linger about the stability of this approach. The company’s plans involve raising massive capital through equity sales and fixed-income securities, which has already yielded $4.6 billion from share sales and $2.6 billion from convertible bond issuance.
This capital raise has enabled MicroStrategy to purchase 78,890 bitcoins, worth $6.62 billion, underscoring its commitment to its strategy. However, the question remains whether this approach will drive bitcoin price above $100,000 sustainably or end up creating a market bubble.
Read Also: Bitcoin sets a new all-time high at $87k. What is driving the momentum?
MicroStrategy’s Bitcoin Strategy: A Risky Bet?
MicroStrategy’s bold Bitcoin investment strategy comes with significant risks. While the company has a five-year debt repayment window, a sharp bitcoin price crash could expose vulnerabilities.
If bitcoin price plummets, MicroStrategy may face liquidity issues, forcing it to sell the bitcoin it holds at unfavorable prices to meet debt obligations. This could have a devastating impact on the company’s financial health.
Additionally, bondholders relying on stock conversion for profits could be left empty-handed if MicroStrategy’s share price collapses. The company’s current valuation, trading at 3.3 times the Bitcoin value on its books, is largely driven by speculative investor confidence in bitcoin’s future appreciation.
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Investors sound alarm as Bitcoin ETF outflows reach record highs.
Bitcoin price surge toward $100,000 on December 20 was overshadowed by a massive exodus of capital from US spot Bitcoin ETFs. Despite briefly exceeding $99,000, bitcoin’s positive price movement was contradicted by net outflows of $277 million from Bitcoin spot ETFs.
The week began promisingly, with bitcoin price rising to a new all-time high of $108,000 on Tuesday. However, the momentum stalled, with bitcoin price plummeting to a three-week low of $92,000 on Friday.
This drastic price correction sparked concerns about whether the market was experiencing a normal correction or the end of the ongoing bull run. Notably, the iShares Bitcoin Trust (IBIT) and Grayscale’s Bitcoin Trust (GBTC) saw record outflows of $72.7 million and $57.36 million, respectively.
By the end of the day, the total net asset value of Bitcoin spot ETFs had decreased to $109.7 billion, down from $121.7 billion on December 17.
Read Also: Bitcoin holds $34,000 support level amidst economic factors and regulatory developments.
Regulatory uncertainty clouds bitcoin’s future.
After hitting record highs in 2021, bitcoin price has retreated to under $50,000, leaving experts uncertain about its prospects for 2022. The cryptocurrency’s rise in 2021 was fueled by growing interest from traditional finance, but regulatory pressures and market volatility have introduced significant uncertainty.
Experts point to sustained adoption by institutional investors and integration into legacy financial systems as key drivers of growth for the crypto space. However, regulatory uncertainty, particularly in Europe and the US, weighs heavily on bitcoin’s future.
China’s crackdown on cryptocurrency trading and mining has already had a significant impact, and the risk of wider regulatory action remains a major concern. As Huong Hauduc, general counsel at Bequant, noted, “There is no certainty in crypto, never mind regulation.”
Bitcoin’s origins as a libertarian alternative to traditional financial institutions have given way to a more nuanced reality, with the cryptocurrency increasingly intertwined with mainstream finance. As regulators and investors navigate this complex landscape, one thing is clear: the future of bitcoin remains uncertain.
Read also: Spot Bitcoin ETFs and the Crypto Market: The Other Side of the Coin
Victor Solomon is a technical analyst at Crypto Asset Buyer (CAB). Over the years, Victor has gained valuable expertise in market analysis, risk management, and community management within the cryptocurrency ecosystem. The founder of Soluvic Crypto Hub, a crypto community where he equips newbies in the space, Victor’s mission is to empower individuals to uncover opportunities and safely navigate risks in the blockchain industry. Victor’s academic foundation includes a BSc. (Ed) in Mathematics, a credential that underpins his strong analytical and problem-solving abilities. Currently, he is expanding his technical expertise as a Software Development student at Brigham Young University. He is an Ex African Manager of Newscrypto..
