The total crypto market capitalization dropped on Jan. 23 with the global market value falling by 5%from $1.6 trillion to $1.47 trillion. Bitcoin (BTC) price fell below $39,000 to trade at $38,521 on the day. Most altcoins followed BTC’s price action with Ethereums’s Ether falling below the $2,200 mark.
ETH/USD daily chart. Source: TradingView
At the time of writing, Ether had recovered slightly and was trading at $2,231, down 5% over the last 24 hours. While Ethereum’s daily trading volume is up by 30%, it is largely due to the sell-off in the market since nothing much is happening on the buyside.
Spot Bitcoin ETFs continue to be a “sell-the-news” event
ETH had recently pulled back from a 20-month high over $2,700, a level reached on Jan. 12 after the approval of spot bitcoin ETFs in the U.S. This has sparked hope among investors that a spot Ethereun ETF approval would soon follow with the SEC’s decision expected in May.
As soon as these ETF products began trading, crypto prices began dumping with the GBTC selling of Bitcoin being blamed for the market crash.
The recent selling pressure in the crypto market has been attributed to FTX selling the entirety of its 22 million shareholding of GBTC – the equivalent of nearly $1 billion.
Many analysts had warned the ETFs would be a sell-the-news event.
“Sell the news’ ‘ refers to how asset prices, leverage and sentiments push the prices higher leading to a bullish environment before the event happens only for prices to plummet soon after it.
CEO and chief investment officer of ARK Invest Cathie Wood was among the few people who predicted that the ETF approval would be a sell-the-news event.
Wood argued that some investors would not want to miss the opportunity to book some profits, as there has been a “big anticipatory move” ahead of the approval.
Speaking in an interview with Yahoo Finance on Dec. 26, the ARK CEO said,
“Those who have been moving in and enjoying some nice profits will probably ‘sell on the news.’ That’s an expression that traders use, so you anticipate the event, beat up the price, and then sell on the news.”
After the fake ETF approval tweet on Jan.9, K33 Research senior analyst Vetle Lunde said that the market response that followed was a glimpse of how the market could possibly react to actual approval news.
“The market showed its hands yesterday; the ETF approval rehearsal favors a sell-the-news reaction,” Lunde wrote on social media platform X.
Therefore, several key observers had believed it would be a “sell the news” event where approval could lead to short-term sell-offs – similar to what is currently going on, and a decline in BTC’s price as the ETF news was already priced in.
Analysts turn bearish on ETH
Ethereum’s recent price action has led many investors to question whether the rally to $2,700 was the top for the bull market as they turned pessimistic about the smart contracts token.
The first short term bearish outlook for Ether ironically is in the demand area, which according to veteran trader analyst Ali said was a strong support zone for Ether.
Ali said ETH enjoyed robust support from “a key demand zone, ranging between $2,388 and $2,460” and that if it “holds strong, there’s a clear path ahead with minimal resistance, offering a potential for upward movement.
Unfortunately, the token dropped below this level on Jan. 22 as observed by MarketSniperPro who said that Ethereum is yet to confirm a bearish signal. According to this analyst, the price has hit the first bearish target below $2,400.
At the time of writing, MarketSniperPro’s second target of $2,200 has been achieved with the final target for Ether sitting below the $2,000 psychological level.
Meanwhile, another trader ChartBuddha posted an ETH chart showing a projected drop below the $2,200 mark saying,
“ETH is volatile, likely to drop from its current position. Monitor closely to buy at lower prices for potential gains towards the 100 and 200 EMAs.”
According to the chart ChartBuddha shared in a Jan. 23 post on X, the price target for bears is around the $2,000 zone, where the 200-day EMA currently sits.