Bitcoin Faces Pressure as Ether ETF Launch Disappoints
On October 2nd, Bitcoin experienced a 5.5% increase in price, reaching $28,600. However, the momentum was short-lived as the launch of Ether futures exchange-traded funds (ETFs) failed to generate significant trading volumes. This lack of enthusiasm for Ether ETFs has raised concerns about the overall support for Bitcoin.
While the recent rally in Bitcoin’s price was encouraging for investors, comments from United States Federal Reserve representatives reiterating concerns about an impending economic downturn have dampened the cryptocurrency’s prospects. These comments, along with other macroeconomic forces, have put downward pressure on Bitcoin’s price.
The U.S. Federal Reserve Vice Chair for Supervision, Michael Barr, stated that he anticipates a slowdown in economic growth due to higher interest rates constraining economic activity. The market is currently divided on the possibility of another interest rate hike by the Fed in 2023. Additionally, the real yield on U.S. 10-year Treasurys reached its highest level in nearly 15 years, contributing to the strength of the U.S. Dollar.
Furthermore, the U.S. has become a more appealing investment destination due to its resilient economy and stronger growth prospects when compared to Europe and China. This shift in investment preferences has also impacted Bitcoin’s price.
In terms of trading metrics, three key indicators highlight a lackluster level of support for Bitcoin. Firstly, the BTC futures premium continues to trade below the neutral threshold of 5%, indicating a lack of demand for leveraged long positions. Additionally, spot trading activity on traditional exchanges has declined to levels not seen since late 2020, suggesting reduced participation by institutional investors.
The decrease in trading volumes may be attributed to major U.S.-based trading firms distancing themselves from the cryptocurrency markets ahead of increased regulatory scrutiny. This regulatory shift has made the market less appealing to institutional investors.
Another factor impacting Bitcoin’s prospects is the dwindling expectation for a spot Bitcoin ETF approval. Despite the anticipation and multiple postponements by the U.S. Securities and Exchange Commission, the recent launch of Ether futures-based ETFs saw lackluster demand. In addition, the Grayscale Bitcoin Trust, which is seeking conversion into a spot Bitcoin ETF, continues to trade at a 19% discount compared to its Bitcoin holdings. This lack of confidence in the spot Bitcoin ETF approval further hampers Bitcoin’s outlook.
Overall, despite the recent rally in Bitcoin’s price, it faces significant challenges. The comments from Federal Reserve representatives, along with macroeconomic forces and trading metrics, indicate a lack of support for Bitcoin. The prospects of breaking above the resistance level of $28,500 in the short term appear less favorable. Investors should closely monitor the market and regulatory developments to assess the future direction of Bitcoin.
Disclaimer: The information in this article is not intended to be and should not be taken as legal or investment advice. The views expressed here are the author’s alone and do not necessarily reflect the views of Cointelegraph.