Bitcoin (BTC) caused a stir among investors last week as its price dropped from $69,000 to $60,800, marking an 18% decline from its all-time high of $73,800 earlier this month. This downward spiral was partly fueled by outflows from the 11 new Bitcoin exchange-traded funds (ETFs), with a total of $836 million leaving these funds between March 18-21, according to data compiled by Farside Investors.
The question arises: Are new investors losing confidence? And if the downward trend persists, how likely are they to continue holding Bitcoin? This situation is unique as it is the first time Bitcoin has reached a new historic high before its halving, which is scheduled to take place in April.
To gain insights into the current market and trading strategies, we reached out to three investors for their analysis and tips.
Lucas Kiely, Chief Investment Officer for Yield App, noted that Bitcoin has been influenced by the equity markets since the launch of the ETFs. He highlighted specific moments in the day when liquidity surges and price action becomes inevitable. He mentioned significant times like 4 p.m. in London, when the FX Fix occurs, and 9:30 a.m. in New York, when the U.S. cash equity markets open. These moments provide opportunities for capturing significant BTC moves and generating profits. However, Kiely warned that liquidity shrinks outside these windows, and price swings become more volatile. He shared his secret sauce, which involves employing a lightning-fast momentum strategy by buying weakness, selling strength, and setting tight stops. This strategy has allowed him to outperform Bitcoin by 10% this month.
Michael van de Poppe, CEO and founder of MN Trading Consultancy, attributed the recent decline in ETF investment to the Federal Reserve (FOMC) meeting. He explained that markets and institutions tend to become risk-averse before such meetings. Additionally, the Bank of Japan’s decision to increase interest rates has negatively impacted risk-on markets. However, van de Poppe believes that these events should not have a lasting impact on the markets. He emphasized that current ETF buyers are likely long-time holders rather than momentum-based traders. He also noted that as Bitcoin’s price rises, the initial interest in ETFs may decline over time. His advice is to buy Bitcoin dips during price corrections of 15-40% to accumulate for the next bull cycle.
Chris Newhouse, DeFi analyst at Cumberland Labs, emphasized that people are aware of the volatility of digital assets based on past headlines. He stated that those buying into ETFs are seeking exposure to the asset class. Newhouse advised buyers to differentiate between FOMO-driven purchases and long-term demand. He suggested considering whether they intend to trade the volatility or invest in the long-term narrative. For those interested in trading volatility, timing and momentum are crucial. On the other hand, for those focusing on the long-term, dollar-cost-averaging (DCAing) is recommended. Newhouse mentioned that he has been actively placing “stink bids” during weeks with price action characterized by quick dips being filled. He highlighted the consistent demand across all tokens, from major cryptocurrencies to specific altcoin narratives. According to him, the market is currently in a buy-the-dip mode, and significant headwinds would be required for a larger pullback to occur.
It is important to note that this article provides general information and should not be considered legal or investment advice. The opinions expressed by the authors are their own and do not necessarily reflect the views of Cointelegraph.