{"id":2067836,"date":"2022-01-04T15:11:06","date_gmt":"2022-01-04T15:11:06","guid":{"rendered":"https:\/\/www.wyckoffsmichina.com\/market-wrap-year-end-review-bitcoin-etf-rally-proved-short-lived-and-100k-dreams-faded\/"},"modified":"2022-01-04T15:11:07","modified_gmt":"2022-01-04T15:11:07","slug":"market-wrap-year-end-review-bitcoin-etf-rally-proved-short-lived-and-100k-dreams-faded","status":"publish","type":"post","link":"https:\/\/www.wyckoffsmichina.com\/en\/market-wrap-year-end-review-bitcoin-etf-rally-proved-short-lived-and-100k-dreams-faded\/","title":{"rendered":"Market Wrap Year-End Review: Bitcoin ETF Rally Proved Short-Lived, and $100K Dreams Faded"},"content":{"rendered":"
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In October, the long-awaited U.S. bitcoin ETF approval sent BTC\u2019s price toward an all-time high of almost $69,000. But extreme leverage preceded a sell-off back down to $47,100 by the end of the year.<\/h2>\r\n
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\r\n\r\nHi, Market Wrap readers! During the final two weeks of 2021, we\u2019re using this space to recap the year\u2019s most dramatic moments in cryptocurrency markets \u2013 and highlight key lessons from this fast-evolving corner of global finance. Over a series of eight posts that started on Dec. 20 and ends today, we recapped what shook crypto markets this year. (Please scroll down for today\u2019s crypto prices and the latest headlines.)<\/i>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nOn Wednesday, we walked through the events leading up to bitcoin\u2019s rise from $30,000 to $50,000. El Salvador\u2019s decision to adopt BTC as legal tender appeared to have been priced in from June, and buyers started to take some profits when the Central American country\u2019s law went into effect in September. During that time, bitcoin and stocks began to fall as concerns about China\u2019s property debt risk lingered.<\/i>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nBut the September dip didn\u2019t last long. The market got a fresh jolt of enthusiasm when the first U.S. bitcoin exchange-traded fund \u2013 a bitcoin futures ETF, that is \u2013 launched in the fourth quarter. Bitcoin climbed from $40,000 toward $65,000 in October, spurring visions of $100,000 by the end of the year. It was not to be: The rally fizzled, bitcoin\u2019s notorious volatility returned, and the six-figure price prediction proved wildly optimistic.<\/i>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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The first U.S. bitcoin-linked ETF<\/h2>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nAfter months of delays, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler announced in August his\u00a0preference<\/a>\u00a0for a bitcoin futures-based exchange-traded fund. Traders became hopeful that the SEC would approve a bitcoin-linked ETF in October.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nLurking behind those hopes was the belief that many investors in traditional markets wanted to bet on bitcoin but lacked the technological setup or know-how to do so; an ETF would let them buy into bitcoin with the ease of buying a stock in an online brokerage account.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nFor years, crypto industry executives had speculated that the SEC\u2019s approval of a bitcoin ETF \u2013\u00a0denied multiple times under former SEC Chairman Jay Clayton<\/a>\u00a0\u2013 might finally bring about the perceived holy grail of \u201cinstitutional adoption\u201d of the cryptocurrency.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nBut not all bitcoin-related ETFs are created the same: A bitcoin futures ETF is backed by futures contracts such as those traded on the Chicago Mercantile Exchange. A bitcoin \u201cspot\u201d ETF, by contrast, is one backed directly by the cryptocurrency.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n\u201cI think his comments are pretty clear that a pure spot bitcoin ETF isn\u2019t coming soon and that futures products would potentially be considered,\u201d Steven McClurg, chief investment officer for Valkyrie, told CoinDesk at the time.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nExperts on the topic warned that a bitcoin futures ETF would be subject to disadvantages, most notably the existence of a phenomenon known as \u201ccontango bleed<\/a>\u201d or \u201croll costs\u201d that would eat into investor returns.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nEven so, some analysts predicted that the mere approval of a bitcoin ETF, whether spot or futures-based, would make crypto more accessible to traditional investors and thereby boost overall market sentiment.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nOn Oct. 15, bitcoin reclaimed the $60,000 price level as investors eagerly awaited a bitcoin ETF approval.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nAnd on Oct. 19, the ProShares Bitcoin Strategy exchange-traded fund (NYSE: BITO), the first bitcoin futures-related ETF to trade in the U.S.,\u00a0went live<\/a>.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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The New York Stock Exchange on Tuesday as the ProShares Bitcoin Strategy ETF (ticker $BITO) started trading. (Cheyenne Ligon\/CoinDesk)<\/p>\r\n\r\n<\/figcaption><\/figure>\r\n<\/div>\r\n<\/div>\r\n

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\r\n\r\nDave Nadig, chief investment officer and director of research of ETF Trends,\u00a0said<\/a>\u00a0that much of the volume on BITO\u2019s first trading day appeared to come from retail investors, because there were few large \u201cblock\u201d trades of the size that big institutional traders often deal in.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n\u201cThis is probably going to be what we all expected, which is it\u2019s an access vehicle for certain players in the marketplace,\u201d Nadig said in a phone interview with CoinDesk at the time. \u201cThere\u2019s lots of folks who are active participants in the markets who just don\u2019t want to cross over the crypto bridge by themselves.\u201d\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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Bitcoin overbought<\/h2>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nBut with bitcoin already up about 40% in the first two weeks of October, some analysts began to question whether the BITO ETF was another \u201cbuy-the-rumor, sell-the-fact\u201d event.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n\u201cLook, we\u2019re up 40% this month, which is only 15 days old, a pause that refreshes,\u201d Mark Yusko, CEO and chief investment officer of Morgan Creek Capital Management, said during a CNBC\u00a0interview<\/a>\u00a0on Oct. 17. \u201cGiven how overbought we are right now,\u201d Yusko said, a fresh sell-off \u201cwouldn\u2019t surprise me.\u201d\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nCrypto bulls weren\u2019t done yet. In the days following BITO\u2019s trading debut, bitcoin continued upward to hit an all-time price high of around $69,000. Several alternative cryptocurrencies (altcoins) joined the rally. Ether, the second-largest cryptocurrency by market capitalization, rose above $4,000 for the first time since mid-May.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nBut as November set in, buyers failed to sustain new highs. Bitcoin began a descent below $60,000 as heavily leveraged traders began to liquidate their positions. Some indicators such as the crypto \u201cFear & Greed Index<\/a>\u201d showed the market in \u201cextreme greed\u201d territory, which typically precedes price drops, as shown in the chart below.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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Bitcoin fear & greed index (CoinDesk, Alternative.me)<\/p>\r\n\r\n<\/figcaption><\/figure>\r\n<\/div>\r\n<\/div>\r\n

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\r\n\r\nAfter many volatile price swings this year, bitcoin eventually stabilized just below $50,000 as of late December.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nOptimistic price calls made earlier in the year, such as a prediction for $100,000 BTC by the end of year, now look quaint, especially with bullish sentiment deteriorating over the past month.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nSome analysts remain hopeful of a short-term price bounce going into the new year, similar to what happened the last time around.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\nAt the very least, crypto investors can probably expect another volatile ride in 2022.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
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Relevant news<\/h2>\r\n<\/div>\r\n<\/div>\r\n
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