Bitcoin's Brief Surge and Subsequent Decline
On January 11, 2024, at 11 a.m. Eastern Time (ET), spot bitcoin exchange-traded funds (ETFs) made an impressive debut with a trading volume of $2.3 billion. However, the excitement was short-lived as bitcoin's spot markets experienced a sudden decline later that afternoon. The price of bitcoin fell below the $46,000 mark, dropping from a high of $49,000.
Bitcoin's Peak and Price Drop
Earlier that day, around 9 a.m. (ET), bitcoin (BTC) reached its peak value of $49,048 on Bitstamp. Unfortunately, this surge was not sustained, and BTC's value plummeted below the $46K barrier, reaching a low of $45,700 per unit. By 11 a.m. (ET), Bloomberg's Senior ETF Analyst, Eric Balchunas, announced that the new spot bitcoin ETFs, along with Grayscale's GBTC, had collectively generated a trading volume of $2.3 billion.
"The 10 fresh spot bitcoin ETFs have seen $1.3b in trading volume so far (as a group they already topped BITO's record). If we add in GBTC we get to $2.3 [billion]," Balchunas said. "And if we add in BITO (which is having record day too but isn't part of 'spot' race) we get $3.5b for the complex," he added. Since then, BTC's spot market price has been extremely volatile.
Market Reaction and Increased Volatility
The commencement of trading likely triggered an initial surge in demand, followed by a wave of short-term profit-taking, which is a common pattern after significant market events. Bitcoin's 24-hour trading volume currently stands at an impressive $57.45 billion, contributing to the total $192.48 billion traded across the entire cryptocurrency ecosystem. However, this rapid surge and subsequent drop led to significant liquidations of BTC long positions, wiping out $53.58 million in just four hours.
In the past 24 hours, coinglass.com's liquidation metrics reported over $119 million in BTC longs being liquidated. The introduction of spot bitcoin ETFs injected short-term volatility into the market, resulting in larger price swings. These fluctuations indicate increased uncertainty and risk in the crypto market. It's not uncommon for such market reactions to major announcements on Wall Street, as markets adjust to new information and investors rebalance their portfolios.
Resurgence in Bitcoin Options and Futures
Interestingly, the total open interest in bitcoin options is on the rise, reaching its peak at the end of December 2023. Similarly, the total open interest in bitcoin futures is also experiencing a resurgence. Currently, CME Group leads the pack with $6.59 billion in bitcoin futures open interest, surpassing Binance's open interest of $4.53 billion as of Thursday afternoon at 1:30 p.m. (ET).
What are your thoughts on bitcoin's market action on Thursday when the spot bitcoin ETFs started trading? Share your opinions in the comments section below.
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How To
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