BTC Faces Litmus Test Ahead of Bitcoin ETF Launch, Sell the News?

After hitting its 2023 high of $35,000 earlier this week, the Bitcoin price has been consolidating at $34,500 for a while as the bulls continue to hold the bandwagon.

Will the Bitcoin Price Rally Continue?

The surge in Bitcoin’s value is due to the expectations that the first US exchange-traded funds (ETFs) directly investing in the cryptocurrency will soon receive approval. The key question at this point is whether the ETFs’ actual approval will trigger some investors to take profits.

Thus, BTC continues to face the litmus test of whether the rally shall continue once the spot Bitcoin ETF arrives in the US market. Hayden Hughes, co-founder of social-trading platform Alpha Impact told Bloomberg:

“Markets have priced in a Bitcoin spot ETF approval and I expect a sell-the-news event if it’s approved”.

The biggest digital currency surged by 16% this week and even briefly exceeded $35,000, a level it hasn’t reached since 2022. In contrast, worldwide stock markets are struggling as long-term Treasury yields rise and geopolitical uncertainties deepen.

Amid the current macro conditions, Bitcoin and crypto have deviated from other risk-ON assets such as US equities. But it will be interesting to see how far Bitcoin’s outperformance of US equities continues.

BTC Technical Test and Derivatives Data

Fibonacci ratios highlight a potential challenge for the Bitcoin rebound just below the $36,000 level. This zone is marked by the 38.2% Fibonacci retracement of Bitcoin’s year-long decline until November 2022.

The weekly relative-strength index (RSI) for Bitcoin, a momentum indicator, recently crossed the 70 level for the first time since 2021. An RSI reading above 70 is typically considered “overbought,” which may suggest lower chances of experiencing rapid rallies similar to the recent 10% intraday surges.

Data from Deribit, the largest cryptocurrency options exchange, indicates a significant accumulation of bullish wagers on BTC reaching $40,000 by the year’s end. This would represent a 16% increase from the current price levels.

On the other hand, Bitcoin seems to stealing attention away from Gold in the recent rally. Bloomberg’s Senior Macro Strategist, Mike McGlone, believes that the dynamics between Bitcoin and gold are evolving. The previous resistance level, with a crypto-to-gold multiple of around 10x until 2020, may be shifting toward a more lasting transformation. The forthcoming approval of US spot Bitcoin ETFs is likely to further solidify Bitcoin’s position as it increasingly becomes a part of the mainstream, potentially eroding gold’s relative standing.