Wall Street jinx? Traders weight ‘sell the news’ potential after Bitcoin ETF launch

Wall Street opened its doors for the first Bit­coin (BTC) exchange-trad­ed fund (ETF) on Oct. 19, with the list­ing of ProShares Bit­coin Strat­e­gy (BITO) on the New York Stock Exchange. The fund attract­ed more than $1 bil­lion in trad­ing vol­ume on its first day, while BTC price ral­lied to a new record high of $67,000.

But the spot gains did not stay for too long with BTC par­ing some gains going into the weekend.

Bit­coin price cor­rect­ed by almost 11% from its all-time high to reach lev­els below $60,000 on Sat­ur­day, rais­ing fears about sell­offs that typ­i­cal­ly come after the launch of major cryp­to deriv­a­tives prod­ucts on Wall Street.

Analysts call for wider BTC correction

Nun­ya Bizniz, an inde­pen­dent mar­ket ana­lyst on Twit­ter, recalled two of such major events: the list­ing of the first Bit­coin futures on the Chica­go Mer­can­tile Exchange (CME) and the debut of the cryp­to trad­ing ser­vice Coin­base’s stock (COIN) on the Nas­daq stock exchange. 

Notably, CME launched its Bit­coin Futures prod­uct on Dec. 18, 2017, the date on which Bit­coin ral­lied towards its then-record high of around $20,000. But the launch also marked the begin­ning of one of Bit­coin’s longest bear cycles, which bot­tomed around $3,200 twelve months later.

Sim­i­lar­ly, the much-cel­e­brat­ed COIN’s debut on Wall Street on April 4, 2021, coin­cid­ed with Bit­coin ral­ly­ing to a new all-time high around $65,000 just ten days lat­er. Nonethe­less, the upside move met a bout of strong sell­offs, caus­ing BTC to cor­rect to as low as $28,800.

Nooo, God. No God, please no! No! No! Nooooooo! pic.twitter.com/ITKFBJqK6h

— Nun­ya Bizniz (@Pladizow) Octo­ber 22, 2021

As a result, the recent ProShares Bit­coin ETF left Bizniz and many oth­er ana­lysts wor­ried about the so-called “buy the rumor, sell the news” cor­rec­tion. For instance, ana­lyst Lark Davis not­ed that he “would­n’t be sur­prised” if the Bit­coin price crash­es fol­low­ing the ProShares ETF launch just like it did after the CME Bit­coin Futures launch.

#bit­coin CME futures
- Announced Octo­ber 31st 2017.
- BTC ral­lies 224%
- Launch on Decem­ber 18th, the day BTC hit the 2017 mar­ket high

Would not be shocked to see the ETF launch play out exact­ly like this. 

Epic buy the rumor, sell the news event pic.twitter.com/sKrmhdLxQv

— Lark Davis (@TheCryptoLark) Octo­ber 8, 2021

Also, Dan More­head, CEO and co-chief invest­ment offi­cer at Pan­tera Cap­i­tal, wrote in a newslet­ter ear­li­er this month that “he might want to take some chips off the table” ahead of the Bit­coin ETF launch.

Impressive debut for Bitcoin ETF

Despite his­toric bear­ish­ness asso­ci­at­ed with high-pro­file Wall Street cryp­to list­ings, some ana­lysts believe the Bit­coin ETF’s impres­sive debut would mean result in lim­it­ed down­side moves in the spot BTC market.

Todd Rosen­bluth, head of ETF and mutu­al fund research at CFRA, told the Finan­cial Times that ProShare’s $1‑billion debut is “a sign of the pent-up demand” among tra­di­tion­al finance com­pa­nies look­ing to score a slice of the ris­ing cryp­to industry.

JPMor­gan Chase added that retail traders account­ed for only 12–15% of net inflows into BITO on the first two days of trading. 

Relat­ed: Bit­coin decides fate of $60K as week­ly close keeps BTC traders on their toes

That point­ed to a sig­nif­i­cant inter­est in Bit­coin ETFs among insti­tu­tions, with cash-mar­ginat­ed Bit­coin Futures open inter­est ris­ing by up to 79% month-to-date and CME basis going from neg­a­tive in July to above 16% ear­li­er this week.

Noelle Ache­son, head of mar­ket insights at cryp­to trad­ing firm Gen­e­sis, not­ed that Bit­coin’s per­pet­u­al futures rolling basis, a met­ric to gauge the demand for lever­age, ticked up but was still only 13.08% com­pared to mid-April’s 34.6%.

High lever­age remains a com­mon fac­tor across recent spot BTC mar­ket cor­rec­tions. In oth­er words, the neu­tral fund­ing rates at the moment sug­gest that the chance of a big pull­back is rel­a­tive­ly low.

The views and opin­ions expressed here are sole­ly those of the author and do not nec­es­sar­i­ly reflect the views of Cointelegraph.com. Every invest­ment and trad­ing move involves risk, you should con­duct your own research when mak­ing a decision.