Analyst: Here's Why Bitcoin ETFs Could 'Reverse Market Structure'

Bitcoin (BTC) prices typically experience profit-taking, consolidation and uncertainty after hitting new all-time highs, with traders wary of opening positions at record highs. That seems to be exactly what happened this week, with bitcoin prices struggling to hold the $60,000 level as support.

Generally speaking, most analysts still maintain a bullish macro view on Bitcoin’s price trajectory, so much so that PlanB, Willy Woo and others claim that the price reaching $67,000 last week is proof that the second half of the bull market has begun.

Here's what analysts have to say about what might happen next for the bitcoin price, as well as some insights into the larger market dynamics currently at play.

Bitcoin ETF has "completely changed the structure of the market"

Much of the hype surrounding the price of Bitcoin over the past few weeks has revolved around the launch of a Bitcoin ETF. For years, analysts believed that the approval of the tool would allow institutional investors to enter a new channel and officially cement Bitcoin’s “mainstream” status.

Now that two futures-based BTC ETFs have been launched, many firms are eager to propose new ETFs, including Valkyrie’s leveraged ETF application and Direxion’s inverse Bitcoin ETF, which allows speculators to short the price of BTC.

The emergence of these ETFs has "completely changed the structure of the market," said Ben Lilly, market analyst and co-founder of Jarvis Labs.

“This will create massive arbitrage opportunities in the market, as does the CME spread that already exists. As more and more traders allocate capital to Bitcoin strategies, this spread will compress for a period of time. And in fact , volatility will certainly compress the pace of progress, as any volatility will result in more capital being executed as part of various strategies.”

According to Lilly, the main takeaway from launching a BTC ETF is that “more capital will flow into various forms of Bitcoin exposure.” He also noted that “this process will take time” and that “until a new equilibrium is found, The spread is likely to persist."

Analysts expect a fierce battle between bulls and bears

One issue that has not received much attention during the launch of Bitcoin ETFs is how the method by which these products determine the price of BTC will affect the actual spot price of BTC and the spread.

David Lifchitz, managing partner and chief investment officer at ExoAlpha, said the "premiums and discounts above fair value" applied to these products could lead to wider spreads between specific Bitcoin ETFs and the underlying spot price, "as these other contracts There are also premiums/discounts, which tend to be larger the longer the contract expires.”

Lifchitz said:

"Add to that the cost of constantly rolling futures from month to month, which also affects the value of the ETF vs. spot over time, and you end up with ETFs that don't track BTC spot prices closely, but just It's relevant!"

In terms of BTC price action, Lifchitz pointed to a firm rejection at the $63,000 resistance level, noting that “the battle between the bulls and the bears is fierce.”

Lifchitz said:

“However, the bears hadn’t weighed heavily on Bitcoin previously, with BTC only dropping to $58,000 before the bulls charged again...thus, we keep our potential downside targets at $58,000 and $53,000 in the near term USD or so, and look to the $63,000 resistance level as support for the next upside.”

Some expect a drop back into the low $50,000 range

A similar sentiment was echoed by independent market analyst Ryan Cantering Clark, who posted the following tweet outlining his reasons for being “completely out of BTC for now.”

In a follow-up tweet, Clark highlighted the lower support zone to watch, as well as the potential for a good entry.

Clark said:

“If $58,000 doesn’t hold, we might revisit the $50,000 low. So I’m either going to get involved there or higher. If leverage can be cleared from the system in the absence of the above, That's great. Right now, that's my biggest concern."

At present, the market capitalization of the entire cryptocurrency is 2.452 trillion US dollars, and the dominance rate of Bitcoin is 44.9%.