As the decision on bitcoin ETFs by the SEC draws near, market participants are preparing for potential market impact. Analysts are reflecting on the possibility of a "buy the rumor, sell the news" situation, considering the implications of an ETF approval on bitcoin's price dynamics.
A Bitcoin ETF Approval Could Trigger Major Market Movements
With the highly anticipated decision on pending bitcoin ETF applications from the SEC approaching, many in the cryptocurrency community are considering their positions in preparation for a potential approval. It is worth noting that the significant increase in Bitcoin's price over the past year, especially since the rapid surge starting in September 2023, could be attributed to market participants front-running the approval announcement. Consequently, selling into the approval announcement might be a prudent move. Investors and analysts are now evaluating the impact of an ETF approval on bitcoin's price.
The "Buy the Rumor, Sell the News" Scenario
The current situation appears to resemble a classic "buy the rumor, sell the news" scenario. This phenomenon is common in financial markets, where asset prices tend to rise in anticipation of upcoming events as markets act as forward pricing mechanisms. Theoretically, with sufficient information available, announcements like the highly anticipated bitcoin ETF approval should already be factored into the asset's market price at the time of the announcement.
However, when the anticipated event finally takes place and becomes public knowledge, some investors may choose to sell their shares to realize gains. This could happen even if the news is positive because the market might have overestimated its impact or investors simply want to take profits. Essentially, the actual event may not have as much additional positive impact as the initial rumor or expectation did. This pattern is particularly relevant in the volatile and sentiment-driven cryptocurrency market, where news and expectations can significantly influence prices.
Expert Analysis on ETF Approval as a Sell-the-News Event
Senior Analyst Vetle Lunde from K33 Research suggests that there is a 75% chance of the ETF approval becoming a sell-the-news event. Lunde points out that traders are heavily exposed ahead of the verdict, with derivatives showing significant premiums following Bitcoin's continuous upside momentum over the past three months. A sell-the-news event might become a self-fulfilling prophecy as a portion of short-term market participants eye the event as an opportunity for profit-taking.
History provides some insight into previous "sell the news" events in the Bitcoin market. Notably, in 2017, Bitcoin's value reached its peak at $20,000 after the launch of Bitcoin futures by the CME Group. Similarly, in 2021, Bitcoin surged to a high of $65,000 following Coinbase's successful IPO, only to experience a decline in value in the following months.
Capriole Investments, in a recent update, advises caution leading up to a potential ETF approval, anticipating short-term sell-the-news style price action. However, they also highlight that the approval would be a major catalyst for long-term capital flows into Bitcoin on higher time frames.
Analyzing Bitcoin price action after an approval, experts agree that over longer time horizons, the approval would have a bullish effect on bitcoin. Michael Anderson of Framework Ventures emphasizes the significance of what happens after the approvals and launches, as that's when the real buying begins.
With the SEC's decision on bitcoin ETFs approaching, market participants are considering the potential sell-the-news impact. The "buy the rumor, sell the news" scenario is a possibility, and historical events in the cryptocurrency market provide valuable insights. While short-term price action may be influenced by profit-taking, experts believe that an ETF approval would have a positive long-term effect on bitcoin.
Frequently Asked Questions
How to Open a Precious Metal IRA
The first step in opening an Individual Retirement Account, (IRA), is to decide if it's something you want. Once you have decided to open an Individual Retirement Account (IRA), you will need to complete Form 806. For you to determine the type and eligibility for which IRA, you need Form 5204. You must complete this form within 60 days of opening your account. Once this has been completed, you can begin investing. You may also choose to contribute directly from your paycheck using payroll deduction.
If you opt for a Roth IRA, you must complete Form 8903. Otherwise, the process will look identical to an existing IRA.
To be eligible for a precious metals IRA, you will need to meet certain requirements. The IRS states that you must be at least 18 and have earned income. Your annual earnings cannot exceed $110,000 ($220,000 if you are married and file jointly) for any tax year. And, you have to make contributions regularly. These rules apply whether you're contributing through an employer or directly from your paychecks.
You can use a precious metals IRA to invest in gold, silver, palladium, platinum, rhodium, or even platinum. However, you won't be able purchase physical bullion. This means you won’t be able to trade stocks and bonds.
There are two major drawbacks to investing via an IRA in precious metals. First, they aren't as liquid than stocks and bonds. They are therefore more difficult to sell when necessary. Second, they don’t produce dividends like stocks or bonds. Also, they don't generate dividends like stocks and bonds. You will eventually lose money rather than make it.
What are the fees for an IRA that holds gold?
Six dollars per month is the fee for an Individual Retirement Account (IRA). This fee includes account maintenance fees as well as any investment costs related to your selected investments.
If you want to diversify, you may be required to pay extra fees. These fees can vary depending on which type of IRA account you choose. Some companies offer free checking, but charge monthly fees for IRAs.
In addition, most providers charge annual management fees. These fees vary from 0% to 11%. The average rate is.25% per year. These rates can be waived if the broker is TD Ameritrade.
Is gold a good investment IRA?
Any person looking to save money is well-served by gold. It is also an excellent way to diversify you portfolio. But gold is not all that it seems.
It has been used throughout the history of currency and remains a popular payment method. It's often referred to as “the world's oldest currency.”
Gold, unlike other paper currencies created by governments is mined directly from the earth. This makes it highly valuable as it is hard and rare to produce.
The supply and demand for gold determine the price of gold. If the economy is strong, people will spend more money which means less people can mine gold. As a result, the value of gold goes up.
The flip side is that people tend to save money when the economy slows. This means that more gold is produced, which reduces its value.
This is why it makes sense to invest in gold for individuals and companies. If you invest in gold, you'll benefit whenever the economy grows.
Additionally, you'll earn interest on your investments which will help you grow your wealth. You won't lose your money if gold prices drop.
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- Saddam Hussein’s InvasionHelped Uncage a Bear In 1989 – WSJ
- Are you interested in keeping gold in your IRA at-home? It's Not Exactly Legal – WSJ
- 7 U.S. Code SS7 – Designation of boards for trade as contract markets
- 26 U.S. Code SS 408 – Individual retirement accounts
- Gold IRA, Add Sparkle to Your Retirement Nest egg
- Understanding China's Evergrande Crisis – Forbes Advisor
The best way online to buy gold or silver
You must first understand the workings of gold before you can purchase it. It is a precious metal that is very similar to platinum. Because of its resistance to corrosion and durability, it is very rare. It's hard to use, so most people prefer buying jewelry made out of it to actual bars of gold.
There are two types of gold coins available today – one type is legal tender, while the other is called bullion. Legal tender coins are minted for circulation in a country and usually include denominations like $1, $5, $10, etc.
Bullion coins are only minted to be used for investment purposes. Their value increases over time because of inflation.
They can't be exchanged in currency exchange systems. One example is that if someone buys $100 worth gold, they get 100 grams with a $100 value. The buyer receives 1 gram of gold for every dollar spent.
When you are looking to purchase gold, the next thing to know is where to get it. There are a few options if you wish to buy gold directly from a dealer. First, go to your local coin shop. Another option is to go through a reputable site like eBay. You can also look into buying gold online from private sellers.
Individuals who sell gold at wholesale and retail prices are called private sellers. Private sellers typically charge 10% to 15% commission on each transaction. A private seller will usually return less money than a coin shop and eBay. However, this option is often a great choice when investing in gold since it gives you more control over the item's price.
An alternative option to buying gold is to buy physical gold. It is easier to store physical gold than paper certificates. But, you still have to take care of it. To ensure that your physical gold remains safe, you need to secure it in an impenetrable container such as a vault or safety deposit box.
To purchase gold by yourself, you can visit a bank and a pawnshop. A bank can offer you a loan for the amount that you need to buy gold. Customers can borrow money from pawnshops to purchase items. Banks often charge higher interest rates then pawnshops.
Finally, another way to buy gold is to simply ask someone else to do it! Selling gold can be as easy as selling. Set up a simple account with GoldMoney.com and you will start receiving payments instantly.
By: David Sencil
Title: Bitcoin ETF Approval: Experts Analyze Potential Sell-the-News Impact
Sourced From: news.bitcoin.com/experts-weigh-in-on-bitcoin-etf-approval-as-sell-the-news-event/
Published Date: Fri, 05 Jan 2024 20:30:27 +0000