Those closely monitoring the ongoing developments in the spot Bitcoin ETF saga are likely aware the stakes have never been higher. Experts are now emphasizing potential scenarios and recommended responses in the event of an approval.
Increasing the cash portion of the investor portfolio and preparing for volatility could be the right way to go.
Short-Term Market Overheating Risks
Crypto analyst MAC_D, who cited CryptoQuant’s data, said that there has been a notable surge in the 1-day to 1-week holder ratio, reaching 6.74%. These investors are considered short-term, and a higher ratio typically signals a short-term market overheating. The analyst suggests that if a market overheating threshold is set at 8%, there could be increased price volatility following the announcement of spot ETF approval.
In a bullish scenario, where Bitcoin reaches $48.5k, the percentage of 1-day to 1-week holders is expected to exceed 8%, indicating a potentially overheated market prone to correction rather than further ascent.
Additional data highlighted that for holders with a holding period of 2-3 years, the average unit price is $48.5k. This cohort, representing the only “losing group” among all long-term and short-term Bitcoin investors, is likely to pose significant resistance, given their average unit price.
In a bearish scenario, the analyst stated that Bitcoin has historically experienced a decline ranging from 20-30% during previous upward rallies. Hence, a correction of similar magnitude could come into play, with $34K and $30K emerging as crucial support levels if the price undergoes a decline.
This expectation is rooted in the analysis of the average unit price based on holding periods. For the 1-week to 3-month and 18 months to 2-year holders, the average unit price stands at $34K, while the 3 to 12-month holders have an average unit price of $30K. As a result, a decrease in these average unit prices is more likely to trigger buying pressure rather than selling pressure.
Prepping for Uncertainty
As the eagerly awaited decision on the approval of the spot Bitcoin ETF looms, the risks in the market are on the rise, accompanied by a growing sense of uncertainty. In light of these circumstances, CryptoQuant data highlighted the need to exercise caution and avoid exposing oneself to excessive upcoming risks.
MAC_D’s findings also suggest that, with the approval outcome imminent, Bitcoin is anticipated to experience a modest upside coupled with a significant potential for a substantial correction. In response to this outlook, a strategic move would be to increase the cash portion within one’s portfolio and proactively prepare for heightened volatility.