As the cryptocurrency community eagerly awaits the SEC's decision on several pending bitcoin ETF applications, market participants are preparing for potential market impact. Analysts are reflecting on the possibility of a "buy the rumor, sell the news" scenario, where the approval of a Bitcoin ETF could trigger major market movements. This article explores the implications of an ETF approval on bitcoin's price dynamics and discusses the historical precedent of similar sell-the-news events.
The "Buy the Rumor, Sell the News" Phenomenon
The concept of "buy the rumor, sell the news" is a common phenomenon in financial markets. It refers to the tendency of asset prices to increase in anticipation of upcoming events, as markets act as forward pricing mechanisms. In theory, if sufficient information is available, the announcement of a highly anticipated event, such as the approval of a bitcoin ETF, should already be reflected in the market price of the asset at the time of the announcement.
However, once the event actually occurs and becomes public knowledge, some investors may choose to sell their shares to realize gains. This can happen even if the news is positive because the market might have overestimated its impact or investors may simply be taking profits. In the volatile and sentiment-driven cryptocurrency market, where news and expectations can significantly influence prices, this pattern is particularly relevant.
Senior Analyst Vetle Lunde from K33 Research suggests that the ETF approval could be a sell-the-news event, with a 75% probability. Lunde points out that traders are considerably exposed ahead of the verdict, with derivatives pushing massive premiums following Bitcoin's recent upward momentum. A sell-the-news event could become a self-fulfilling prophecy, as a significant portion of short-term market participants eye the event as an opportunity for profit-taking.
History provides some insight into this phenomenon. In 2017, Bitcoin's value peaked at $20,000 after the launch of Bitcoin futures by the CME Group. Similarly, in 2021, Bitcoin reached a high of $65,000 following Coinbase's successful IPO, only to experience a decline in value in the subsequent months.
Capriole Investments recommends caution in the lead-up to a potential ETF approval, anticipating short-term sell-the-news style price action. They question how much more short-term upside can be expected following approval. However, on longer time frames, the ETF approval is seen as a major catalyst that will open up long-term capital flows into Bitcoin.
Experts emphasize the importance of the time frame in analyzing Bitcoin's price action after approval. While there is general agreement that the approval would be bullish for Bitcoin over longer time horizons, the real buying is expected to happen after the approvals and launches.
Michael Anderson of Framework Ventures summarizes this perspective, stating that the run-up in prices so far has been driven by those already in the market who recognize the potential of these rulings and approvals. However, what matters most is what happens after the approvals and launches, as that is when the real buying activity begins.
The pending SEC decision on bitcoin ETFs has market participants speculating on potential market impact. The "buy the rumor, sell the news" phenomenon suggests that the approval of a Bitcoin ETF could trigger significant market movements. While short-term sell-the-news price action is anticipated, experts believe that the approval will be a major catalyst for long-term capital flows into Bitcoin. The time frame is crucial in evaluating Bitcoin's price dynamics after approval, with general consensus that the real buying activity will occur post-approval.
What are your thoughts on a Bitcoin ETF approval as a sell-the-news event? Share your opinions in the comments section below.
Frequently Asked Questions
How Much of Your IRA Should Include Precious Metals?
It's important to understand that precious metals aren't only for wealthy people. It doesn't matter how rich you are to invest in precious metals. There are many methods to make money off of silver and gold investments.
You might also be interested in buying physical coins, such bullion rounds or bars. You could also buy shares in companies that produce precious metals. Your retirement plan provider may offer an IRA rollingover program.
No matter what your preference, precious metals will still be of benefit to you. They offer the potential for long-term, sustainable growth even though they aren’t stocks.
Their prices are more volatile than traditional investments. So, if you decide to sell your investment down the road, you'll likely see more profit than you would with traditional investments.
What is the best precious-metal to invest?
Answering this question will depend on your willingness to take some risk and the return you seek. While gold is considered a safe investment option, it can also be a risky choice. For example, if your goal is to make quick money, gold may not suit you. Silver is a better investment if you have patience and the time to do it.
If you don’t want to be rich fast, gold might be the right choice. Silver may be a better option for investors who want long-term steady returns.
What is the tax on gold in an IRA
The fair market price of gold when it is sold determines the tax due on its sale. If you buy gold, there are no taxes. It is not considered income. If you decide to sell it later, there will be a taxable gain if its price rises.
Gold can be used as collateral for loans. Lenders try to maximize the return on loans that you take against your assets. This often means selling gold. The lender might not do this. They might just hold onto it. They might decide to sell it. You lose potential profits in either case.
To avoid losing money, only lend against gold if you intend to use it for collateral. If you don't plan to use it as collateral, it is better to let it be.
Should You Buy Gold?
In times past, gold was considered a safe haven for investors in times of economic trouble. Many people today are moving away from stocks and bonds to look at precious metals, such as gold, as a way to diversify their investments.
Gold prices have been on an upward trend over recent years, but they remain relatively low compared to other commodities such as oil and silver.
Some experts think that this could change in the near future. They believe gold prices could increase dramatically if there is another global financial crises.
They also mention that gold is becoming more popular due to its perceived worth and potential return.
These are some important things to remember if your goal is to invest in gold.
- The first thing to do is assess whether you actually need the money you're putting aside for retirement. You can save for retirement and not invest your savings in gold. The added protection that gold provides when you retire is a good option.
- You should also be aware of what you are getting into before you buy gold. There are many types of gold IRA accounts. Each offer varying degrees of security and flexibility.
- Finally, remember that gold doesn't offer the same level of safety as a bank account. It is possible to lose your gold coins.
So, if you're thinking about buying gold, make sure you do your research first. Protect your gold if you already have it.
How much gold do you need in your portfolio?
The amount that you want to invest will dictate how much money it takes. A small investment of $5k-10k would be a great option if you are looking to start small. As you grow, you can move into an office and rent out desks. This will allow you to pay rent monthly, and not worry about it all at once. You only pay one month.
It is also important to decide what kind of business you want to run. In my case, we charge clients between $1000-2000/month, depending on what they order. If you are doing this type of thing, it is important to think about how much you can expect from each client.
If you are doing freelance work, you probably won't have a monthly salary like I do because the project pays freelancers. Therefore, you might only get paid one time every six months.
Before you can determine how much gold you'll need, you must decide what type of income you want.
I suggest starting with $1k-2k gold and building from there.
Who holds the gold in a gold IRA?
The IRS considers anyone who owns gold to be “a form money” and therefore subject to taxation.
This tax-free status is only available to those who have owned at least $10,000 of gold and have kept it for at minimum five years.
While gold may be a great investment to help prevent inflation and volatility in the market, it's not wise to keep it if you won't use it.
If you plan to sell the gold one day, you will need to report its worth. This will affect how much capital gains tax you owe on cash you have invested.
It is a good idea to consult an accountant or financial planner to learn more about your options.
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (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)
- 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)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
- Yahoo Finance provides information about Barrick Gold Corporation's (GOLD) stock price, news, quote, and history.
The History of Gold as an Asset
From the beginning of history, gold was a popular currency. It was popular because of its purity, divisibility. uniformity. scarcity and beauty. In addition, because of its value, it was traded internationally. Because there were no internationally recognized standards for measuring and weighing gold, the different weights of this metal could be used worldwide. For example, one pound sterling in England equals 24 carats; one livre tournois equals 25 carats; one mark equals 28 carats; and so on.
The United States began issuing American coin made up 90% copper, 10% zinc and 0.942 fine-gold in the 1860s. This caused a drop in foreign currency demand which resulted in an increase of their prices. In this period, large amounts of gold coin were minted by the United States, which caused the gold price to drop. Due to the excessive amount of money flowing into the United States, they had to find a way for them to repay some of their debt. They decided to return some of the gold they had left to Europe.
Many European countries didn't trust the U.S. dollars and started to accept gold for payment. After World War I, however, many European countries started using paper money to replace gold. Since then, the price of gold has increased significantly. Even though gold's price fluctuates, it is still one of the most secure investments you could make.
By: David Sencil
Title: Bitcoin ETF Approval: Market Impact and “Buy the Rumor, Sell the News” Phenomenon
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
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