BTC ETF optimism vs. profit-taking: Why Bitcoin’s $116K battle matters now
Comparing the Bitcoin price to what its fair value should be based on ETF flows, BTC was trading at an 11% discount.
Key Takeaways
Why was Bitcoin unable to rally beyond $116k?
The weekend momentum was expected to continue, but short-term BTC holders used the price bounce to take profits, halting the rally at a key resistance level.
What is the argument behind Bitcoin being undervalued?
A crypto analyst used the ETF flows to calculate the fair value of BTC, showing how recent price action was a divergence from expectations based on capital flows.
Bitcoin [BTC] rallied to $116.4k on the 27th of October. This was the short-term peak of a bullish push that began at the $107.5k range lows the previous Thursday.
Having reached a short-term resistance level, Bitcoin was forced to pull back in recent hours.
In a recent report, the importance of the $116k area was explained. It represented the mid-range resistance level as well as a key short-term magnetic zone for the price.
However, the selling pressure from profit-taking halted further price advances.
Short-term selling caps the move
In a post on X (formerly Twitter), crypto analyst Maartun observed an increase in the Short-Term Holder (STH) profit transfers.
In fact, the Bitcoin STH P&L to Exchanges showed 18.7k BTC moved at a profit in the preceding 24 hours.
This represented selling and profit-taking at a key local resistance, hampering the bulls’ ability to drive the rally past $116k. It also underscored weak short-term conviction, which could lead to higher price volatility.
Is Bitcoin undervalued right now?
On the 27th of October, U.S. Spot exchange-traded funds (ETFs) for Bitcoin experienced a modest inflow of $149.3 million. While this amount is relatively small, it indicates that short-term sentiment is not entirely bearish.
However, the market signals can be quite confusing.
There is mid-range resistance, selling pressure from short-term holders, and a decrease in Open Interest over the past 24 hours, all occurring alongside these positive ETF flows.
What should market participants anticipate next?
There is a chance that $113.5k acts as support and boosts Bitcoin higher, but it is unclear how long the price might consolidate around the $116k resistance.
Remember, $117k is also a major supply zone, and liquidation levels were piled up overhead.
What was clear was that Bitcoin was undervalued compared to its ETF flows. In a post on X, crypto analyst Axel Adler Jr explored a price model that used the ETF capital inflows to calculate BTC’s fair value.
At the time of writing, this fair value was $128.4k, while Bitcoin traded at $114.3k, 11% below the model’s predicted price.
