Bitcoin (BTC) has fallen more than 5% to $42,600 since spot ETFs debuted in the US on Thursday in what appears to be a classic “sell the truth” price action.
The sell-off could continue in the near term, according to analysis of Bitcoin price patterns and technical indicators by 10x Research.
“Bitcoin’s RSI divergence indicates a correction,” 10x Research, led by Markus Thelen, said in a note to clients on Monday, adding that the pullback could run out near the $38,000 dynamic support level.
Bearish divergence occurs when prices reach a new extreme level and momentum indicators such as the Relative Strength Index (RSI) do not reach them, indicating that the uptrend has been exhausted.
BTC reached a two-year high above $49,000 last week, which the 14-day RSI failed to confirm, as shown in the chart below. The subsequent price decline confirmed the validity of the bearish divergence.
The MACD histogram, used to measure trend strength and changes, has crossed below zero, indicating a bearish shift in momentum.
According to Thelen, investors in Grayscale’s ETF, Grayscale Bitcoin Trust (GBTC), a shift to other lower-fee options will likely impact the price of bitcoin. While Grayscale charges 1.5%, other asset managers like BlackRock charge 0.25%. GBTC, previously a closed credit institution, is one of the largest holders of Bitcoin, with a stash of more than $27 billion. GBTC shares began trading in 2013 and became redeemable on January 11.
“Grayscale is betting that investors will slowly shift away from the 1.5% annual management fees offered by ETFs (due to tax considerations) rather than opt for other reputable companies that offer 80% lower fees. There has been a lot of negative news about parent company DCG And Grayscale itself, in particular charging a 2.0% management fee on a product that at one point traded at a 50% discount to its net asset value – thus overcharging holders of GBTC ($27 billion market cap),” 10x said.
“Investors will sell first before moving their BTC exposure to another ETF issuer. This will cause downward pressure on Bitcoin and remain a drag,” 10x added.