Bitcoin’s Testing of $66K Signals More Volatility Ahead, Analysts Predict Calm to Follow
Bitcoin reached $66,000 during Asian trading on Friday, with expectations of more volatility ahead despite an impending market calm. The recent 10% drawdown in Bitcoin was influenced by spot Bitcoin ETF outflows of around $300 million from GBTC on March 20, according to Semir Gabeljic, Director of Capital Formation at Pythagoras Investments. This drawdown aligns with historical patterns before Bitcoin halving events, suggesting more volatility leading up to the next halving.
Meanwhile, the CoinDesk 20 (CD20), reflecting the world’s most liquid digital assets, is down 0.5%. Nevertheless, CoinDesk’s Digitization Index (DTZ), tracking digitization protocols like Ethereum Name Service (ENS), surged by 2.7% in Asian trading hours.
Singapore-based QCP Capital noted in a Friday morning note that the market is consolidating. Bitcoin and Ethereum trading in a relatively tight range. They anticipate a potential break in the market this weekend after last weekend’s pre-FOMC volatility. QCP also observed significant outflows from the Grayscale Bitcoin Trust (GBTC), with $358.8 million leaving the fund. They predict a fourth consecutive day of BTC spot exchange-traded fund net outflows.
Ethereum (ETH)
Regarding Ethereum (ETH), QCP suggests that the market is beginning to discount the approval of a spot Ethereum ETF in the near future. The Grayscale ETH discount has widened from -8% to -20% over the past two weeks, indicating reduced expectations for an ETF approval. Prediction markets, such as Polymarket, also reflect this sentiment. With a contract asking if an Ethereum ETF will be approved by May 31 trading at a 21% probability.
The Ethereum Foundation is currently under investigation by a state authority, likely the Securities and Exchange Commission (SEC). There is uncertainty regarding the SEC’s classification of ether as a security, as the Commission has not been forthcoming with key documents requested under the Freedom of Information Act (FOIA).
On the trading front, there is optimism for Ethereum’s price, with Polymarket bettors predicting an all-time high in the second quarter. However, a significant portion of traders also believes that there will be no all-time highs for Ethereum in 2024. As of now, Ether is trading above $3500, up 1.2% according to CoinDesk Indices data.
