Bitcoin (BTC) has experienced a more than 5% decline to $42,600 since the introduction of spot ETFs in the U.S. last Thursday, signaling a possible “sell the fact” reaction in the market. Analysis by 10x Research suggests that this sell-off may continue in the near term, with technical indicators pointing towards a correction.
According to 10x Research, led by Markus Thielen, Bitcoin’s Relative Strength Index (RSI) divergence indicates a correction, and the pullback might find support near the dynamic level of $38,000. RSI divergence occurs when prices reach new extremes, but momentum indicators like RSI fail to confirm, suggesting potential exhaustion in the upward movement.
BTC achieved a two-year high above $49,000 last week, but the 14-day RSI did not confirm this move, as illustrated in the chart. The subsequent decline in price has validated the bearish divergence. Additionally, the Moving Average Convergence Divergence (MACD) histogram, used to assess trend strength and changes, has crossed below zero, indicating a bearish shift in momentum.
Markus Thielen suggests that the switch of investors in Grayscale’s ETF, the Grayscale Bitcoin Trust (GBTC), to other low-fee options might impact Bitcoin’s price. Grayscale charges a 1.5% management fee, while other asset managers like BlackRock charge significantly less at 0.25%. GBTC, a major holder of Bitcoin with a stash worth over $27 billion, recently transitioned from a close-ended trust to becoming redeemable on Jan. 11.
Thielen notes, “Grayscale is betting that investors will slowly switch out of their 1.5% annual management fee ETF offering (due to tax consideration) instead of choosing other reputable companies that offer 80% less in fees.” The negative news around Grayscale’s parent company DCG and Grayscale itself, along with the history of overcharging GBTC holders, could contribute to downside pressure for Bitcoin, creating an overhang in the market.
“Investors will first sell before they transfer their BTC exposure to another ETF issuer. This will cause downside pressure for Bitcoin and remain an overhang,” 10x Research added.
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