Bitcoin’s Forays Into Traditional Finance Have Been Marked by Sell-Offs

• The price of bitcoin tends to decline shortly after the crypto’s forays into traditional finance.
• The launch of bitcoin futures, options, and futures ETF all marked short-term tops in the price of bitcoin.
• Since the launch of spot ETFs last week, bitcoin has declined by about 9%.

Our Chart of the Day is from Louis Sykes of All Star Charts, and it shows that the price of bitcoin tends to decline shortly after traditional finance gets into the cryptocurrency. 

For example, the CME’s launch of bitcoin futures on December 18, 2017, represented a temporary top for the cryptocurrency that was followed by a stunning price crash of 81% over the subsequent year.

And when the CME launched bitcoin options contracts on January 13, 2020, the cryptocurrency shortly thereafter experienced a swift and painful decline of about 53% over the next two months. 

Other traditional finance events for bitcoin include the IPO of Coinbase, a crypto custodian, on April 14, 2021. After the Coinbase IPO, the price of bitcoin tumbled by 55% over the next two months before mounting a five-month recovery to its record high of about $69,000.

Finally, the launch of a bitcoin futures ETF by ProShares on October 19, 2021, nearly marked the top in the price of bitcoin. The cryptocurrency traded at about $64,000 that day, and it topped out at $69,000 just three weeks later. After peaking, bitcoin experienced a brutal one-year bear market and sank as much as 78%.

With the launch of 11 spot bitcoin ETFs last week, the question is whether bitcoin will follow its historical pattern and sell-off again.

“Bitcoin has a tendency to cool-off after a significant traditional finance launch. Will the recent Bitcoin spot ETF be the same?” Sykes asked on social media. 

So far, it’s not looking good for bitcoin investors. The cryptocurrency has declined by about 9% since the spot bitcoin ETFs began trading last Thursday.