Bitcoin breaks $45,000 at the start of the year, analysts signal “sell the news”

As the results of the approval of the US spot Bitcoin ETF are about to be released, Bitcoin successfully broke through $45,000 at the beginning of the new year, the first time since April 2022. After the opening of the U.S. stock market on Tuesday, Bitcoin hovered around $45,000, up nearly 2% in 24 hours and 13% in 30 days.

The decision on the Bitcoin spot ETF is expected to be made between January 8 and 10, however, Vetle Lunde, senior analyst at K33 Research, predicted in a report that the news of approval is likely to be a "sell the news" event.

“Everything suggests that traders are taking considerable risk ahead of the verdict, with derivatives pushing up huge premiums following Bitcoin’s sustained upward momentum over the past three months,” Vetle Lunde wrote in the report. “Selling the news event could become a self-fulfilling prophecy as a large portion of short-term market participants already take profits on the news.”

Vetle Lunde believes there is a 75% chance that the "sell the news" event will occur, while there is a 20% chance that it will push prices higher. In addition, there is still a 5% chance that the ETF will be rejected.

ETF Bubble

Noelle Acheson, author of the Crypto is Macro Now newsletter, said: “If the SEC does not give the green light, does this mean that the BTC price will fall sharply? It is possible. Speculation does seem to be getting a bit ahead of itself, with the Bitcoin funding rate (the cost of long perpetual futures positions, an indicator of trader sentiment) climbing sharply over the past week.”

Analysts pointed to signs of a froth in the market, with futures premiums on the Chicago Mercantile Exchange surging to an annualized 50% as institutional players showed expectations of approval by continuing to build long positions.

Lunde added that open interest has grown by more than 50,000 BTC in the past three months, saying: “At current premiums, maintaining CME exposure involves monthly rolling costs of 1-2% - acceptable in the medium term before key events, but unsustainable in the long term, especially when cheaper alternatives for exposure emerge.”

On the retail side, funding rates on offshore exchanges also hit an annualized high of 72% amid the Bitcoin rally. K33 Research said: “With one week left before the ETF ruling, shorts are reluctant to enter the market, which increases the perpetual premium in the spot market and makes it costly for longs to maintain. Aggressive leverage of longs after the ETF ruling may lead to a long squeeze in the market.”

Falling before rising

Lunde added that while the money could come from products like futures-based ETFs, the “key factor” is net inflows of new money, which should be at least 50,000 BTC ($2.3 billion) in January.

Lunde expects that the current Bitcoin price rally will peak on the ETF ruling day due to heavy profit-taking by short-term traders and unsustainable premiums. However, in the long run, the inflow of funds into potential spot ETFs, coupled with the supply shock of the Bitcoin halving event in April, will drive prices higher on a longer time frame.

The trading team Stockmoney Lizards is optimistic about the price of BTC, predicting that it will hit a record high by the end of 2025. Analysts say that macroeconomic factors (US recession, inflation) also need to be considered. However, this is not a bad thing for Bitcoin in the end. Stockmoney Lizards said: "More and more people view Bitcoin as 'digital gold' and an inflation-proof asset (once it is widely adopted) , and a means of storing value in times of economic downturn. Therefore, we do not think that the current bull market will end soon."