Bitcoin is suddenly falling around $42,000 and ETF rumors are rife

The price of Bitcoin fell more than 8% in a matter of hours, falling back below $42,000, erasing all the gains accumulated since the beginning of the year. This drop led to massive liquidations that reached over $644 million in 24 hours. But should we really be looking for the reason for this decline?

Bitcoin loses 8% in a few hours

Bitcoin price lost more than 8% in a few hours, from 45,400 to less than $42,000, before rising again to finally oscillate between $42,000 and $42,500. In other words, Bitcoin gave back all its gains accumulated since the beginning of the year :

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Bitcoin price development since the beginning of 2024

Such a fall was not without consequences for merchants: at the time of writing these lines more than $644 million was liquidated in the last 24 hoursthe vast majority were wiped out when BTC fell below $44,000.

According to Coinglass, this is a simultaneous liquidation of positions long the largest from 2022. And according to PeckShield, as whale he was unlucky to be there liquidate the position shorts to over 2,800 WETH, or $6.7 million.

But what is it that has caused us to fall so precipitously? According to most observers, the January 2 publication of the analysis firm Matrixport, which literally says that A series of bitcoin spot ETFs pending at the Securities and Exchange Commission (SEC) has reportedly been shelved.

However, this document received strong criticism, especially when it comes to several facts supporting his conclusion. Indeed, Matrixport states that “ Although we have seen numerous meetings between ETF applicants and SEC staff that have resulted in updates, we believe the application will fall short of a critical requirement. “. And that without specifying what the request was.

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The document later states: ” This condition could be met by the second quarter of 2024, but we expect the SEC to reject all proposals in January. » In addition, if further assurance of “reliability” from Matrixport was needed, the firm published an article on the same day titled… “Bitcoin spot ETF approval looms, BTC expected to hit $50,000. »

Eric Balchunas, an ETF analyst at Bloomberg Intelligence, commented on the publication saying that it was not only contrarian, but that it was pitted against internal resources among ETF applicants :

“Now you’re basically saying that a few mainstream journalists with more insider sources are also wrong.” I’m not saying it’s impossible (again, we’re still “only” 90%), but it contrasts with a LOT of good information. »

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Should we look for a reason for all market movements?

In addition to the publication of Matrixport, which has been catalyzing all the attention of the crypto community for several hours, it is worth remembering that the cryptocurrency market is inherently highly volatile, and that there is not always news to explain a sudden rise or fall.

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In the current scenario, it could more simply be a significant sale of one or more whaleswhether to make a profit on the sale or open positions shorts while massively liquidating positions long already open.

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“We are likely to see increased volatility in the near term as markets begin to price risk across asset classes and we enter a year with many question marks. Regardless, we saw the markets collapse in early December before recovering again. »

Fadi Aboualfa, head of research at Copper

In any case, market volatility is likely to remain very high until January 10when SEC to rule on Ark Invest’s spot Bitcoin ETF

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Source: Bloomberg

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