Glassnode Report: Are Spot Bitcoin ETFs Already Priced?

Author: Checkmate, Glassnode; Compiler: Songxue, Golden Finance

Abstract

• Bitcoin investors have had a chaotic week as the U.S. Securities and Exchange Commission successfully approved ten new spot Bitcoin ETF products.

• Bitcoin prices hit multi-year highs before falling to year-to-date lows, with the market selling off 18% over the weekend. This was driven by derivatives leverage and spot profit-taking.

• Several indicators reached levels that have encountered significant resistance in past cycles, with long-term holders spending around 75,000 Bitcoin to take profits.

In just two weeks, 2024 has proven to be a true rollercoaster ride for Bitcoin investors. In what is arguably the most significant financial product launch in history, the U.S. Securities and Exchange Commission has approved 10 spot Bitcoin ETF products for trading in the U.S. market.

In many ways, Bitcoin has succeeded in drawing the traditional financial community and U.S. regulators into a notoriously chaotic and volatile world. On January 9, an error occurred in the ETF approval after the SEC's X account was compromised and a false positive approval notice was issued. The BTC price surged to $47,200, but then, the price quickly fell back to $44,500.

The second error occurred on January 10, as the actual SEC approval document leaked from the SEC website before U.S. markets closed. Ultimately, all 10 ETF products were approved and began trading on January 11.

The price of BTC thus hit a multi-year high, reaching just under $48,800. The market then fell 18% over the weekend, hitting a new year-to-date low of $40,000 when traditional markets were closed. Bitcoin once again welcomes Wall Street to its world.

Spot ETF is listed< /h2>

In the first two days of trading, the total trading volume of spot ETFs reached US$7.823 billion, and the inflow of assets under management exceeded US$1.4 billion. This exceeds the $579 million in outflows currently converted into GBTC ETF products, as investors reallocate after years of underperformance during its time as a closed-end fund (ETF fees fell from 2.0% to 1.5%).

Despite these outflows, GBTC remains the ETF giant on the floor, with trading volume reaching $4.166 billion over two trading days, accounting for approximately 57% of the total. It’s likely that funds will continue to be shuffled within GBTC in the coming weeks.

Source: James Seyffart (Bloomberg)

The sheer size of GBTC relative to other ETF products can be seen from bitcointreasuries. net can be seen in the picture below. Despite outflows from GBTC, their massive holding of 617,080 BTC dwarfs their competitors, and the associated liquidity conditions remain attractive to any liquidity and depth-sensitive traders and investors.

Source: bitcointreasuries.net

After just two trading days, US spot ETF products currently hold a total of 644,860 BTC ($27.2 billion), accounting for 29.7% of global ETF holdings.

Overall, volumes and AUM make it the largest and most important ETF in history One of the issuances,and in many ways marks the end of the early stages of Bitcoin's maturation and development.

Source: bitcointreasuries.net< /span>

Promote news events?

Whether it’s a halving or an ETF launch, Bitcoin investors love to debate whether the event is priced in. Despite significant fluctuations along the way, BTC prices have remained essentially flat year to date, indicating that this particular event was priced in perfectly.

Of course, there are key drivers behind the medium-term volatility, with open interest (OI) rising significantly in both futures and options markets since mid-October:

BTC Futures OI increased by 7 billion (+66%), with $1.1 billion being flushed out this week.

BTC options OI increased by 6.6 billion (+70%), with $2.3 billion in positions closed this week due to contract expiration and liquidation.

Open interest in both markets remains near multi-year highs, indicating increased leverage and emerging markets a more dominant force.

Live Chart

The chart below shows the futures open interest percentage Change oscillator. This tool can be used to spot periods of rapid change in overall market leverage.

High values ​​indicate a +2 standard deviation increase in OI. (Red)

A low value indicates a -2 standard deviation decrease in OI. (Blue)

We can see that a major deleveraging event occurred on January 3, with almost $1.5 billion of open interest liquidated in one day. Instead, open interest increased significantly between January 9 and 11 as ETF speculation peaked with prices approaching $49,000.

The following weekend, the price fell back to $40,000 as new ETF share holders entered Bitcoin’s all-day trading environment.

Live Chart

The perpetual funding rate also maintains a strong positive bias, indicating that leveraged traders are Net long status and sometimes paying shorts over +50% annualized returns. We can also see a clear phase shift in mid-October, with funding rates moving from a structure that oscillated around neutral to being consistently positive.

Funding rates have cooled somewhat this week, but overall remain positive.

Live Chart

Option implied volatility has also reversed since mid-October, with this month Weeks of chaos soared. Implied volatility has been declining for years since May 2021 as interest wanes during the bear market. It is also worth noting that options market infrastructure, liquidity and depth have matured significantly in 2023, with open interest currently on par with the futures market (see WoC-51-2023).

This downward trend appears to have reversed in the short term, with IV more than tripling since a low of around 30% in October, reaching over 97% this week. As spot ETF products open new doors to institutional and retail capital, it is likely that Bitcoin’s volatility will begin to evolve as well.

Old Bitcoin, newbie

Holders of long-dormant coins during major market events It's common to react. This includes periods when markets set new ATHs, around cycle tops and bottoms, and periods of significant shifts in market structure (such as Mt Gox, the halving, and now the launch of spot ETFs).

The extent of unrealized gains and losses held by these long-term holders can be measured by LTH-NUPL. The indicator reached 0.55 this week, a meaningfully positive number that brings the average unrealized profit for long-term investors to 55% .

This is also a level where Bitcoin bulls have encountered meaningful resistance in previous cycles.

Live Chart

Long-term holders also have their supply slightly below their ATH since November Around 75,000 BTC were lost as old Bitcoins were used to take profits.

While 75,000 BTC is a meaningful number, it should also be viewed in the context that the total LTH supply represents 76.3% of the circulating coin supply. As this spending occurs, the opposite metric, short-term holder supply, is only just recovering from all-time lows.

Live Chart

Having said that, the amount of spending by these veterans is statistically significant, leading to recovery The standard deviation of the supply (tokens used for more than 1 year) increases by +1.

As shown in the chart below, such events occur relatively rarely but are generally consistent with an uptrending market encountering meaningful resistance.

Live Chart

As these old Bitcoins are put back into circulation, they contribute to the The biggest profit-taking event since March ATH. The peak realized profits for this cycle are set for January 4, with over $1.3 billion in profits locked in daily as tokens change hands at a higher cost basis.

In an upward market trend, profit taking is normal, the real problem is the inflow of new demand Is it enough to absorb it all.

Live Chart

Summary

Last week was historic, both literally and figuratively. The size of these new spot Bitcoin ETFs has reached a new record, and a decade of industry efforts has finally come to fruition. After more than a decade of hard work and against a backdrop of significant political, regulatory and financial headwinds, the spot ETF ball has finally reached the end zone.

Somewhat poetically, since Hal Finney on January 11, 2009 This spot Bitcoin ETF has been trading for 15 years, since "Running Bitcoin" was first tweeted. The first Bitcoin transaction between Satoshi Nakamoto and Hal occurred the next day, January 12, 2009.

Multiple indicators in the on-chain and derivatives space suggest that a significant portion of Bitcoin investors are indeed viewing this as a selling news event. The key question going forward is whether demand will flow into ETFs, either in anticipation of the April halving, or from humble yet reliable holdings Whether the inflow of demand from investors is enough to break through this resistance.

ETFs may have been priced in, but for how long?