Bitcoin Dips 4% Despite TradFi Involvement In Recent Price Rally

Following a five-week bullish streak, Bitcoin (BTC), the world's largest crypto asset by market capitalization, saw a 4% dip in its value despite the huge endorsement it got from traditional finance giants.

Bitcoin slid to $34,970 Tuesday afternoon from the over $36,000 price level despite the welcome CPI data in October and amid the endorsement of Wall Street giant BlackRock.

The significant involvement of traditional finance (tradfi) in the recent price rally of Bitcoin does not stop with BlackRock, as for the first time ever, the open interest of BTC on the global derivatives marketplace Chicago Mercantile Exchange surpassed 100,000 contracts, exceeding that of Binance, the world's largest centralized cryptocurrency exchange platform by trading volume.

"A noteworthy aspect is the substantial involvement of traditional finance in the recent uptrend. For the first time, the BTC open interest on the Chicago Mercantile Exchange (CME) exceeded 100,000 contracts, surpassing Binance and becoming the leading venue in terms of open interest for BTC. This strong presence of traditional finance investors is also evident in the narrowing discount of the Grayscale Bitcoin Trust (GBTC), currently at 10.3%, the lowest level recorded since August 2021," Matteo Greco, research analyst at publicly listed digital asset and fintech investment business Fineqia International, said in a note sent to International Business Times.

The analyst also believes the surge in tradfi activities linked to Bitcoin highlights the burgeoning confidence rooted in the optimism of a future spot Bitcoin exchange-traded fund approval, with the U.S. Securities and Exchange Commission's (SEC) final decision on the filings set for Jan. 10, 2024.

"The increased traditional finance activity associated with BTC underscores the confidence that market investors currently hold regarding a future BTC Spot ETF approval. It is important to note that the first final deadline for a decision from the SEC is scheduled for January 10, 2024, concerning the 21Shares BTC Spot filing," Greco said.

Believing that the commission will reveal its decision before the designated date, the research analyst thinks the SEC will approve or reject all the filings at once to ensure that there will be no first-mover advantage.

"Most likely, the SEC will make a definitive decision — approval or denial — before this date, approving or denying all the filings, to avoid providing any issuer with a first-mover advantage," he told IBT.

Moreover, Greco thinks the SEC's approval will pave the way for a substantial inflow of investments from traditional finance to the cryptocurrency market.

"The surge in price and trading activity, particularly through traditional finance channels, coupled with the consistent decrease in GBTC discount and the notable net inflow observed in ETPs with digital assets as underlying, suggests that market investors are placing their bets on an approval. Securing approval from the SEC would likely draw significant investments from traditional finance, ushering in a fresh influx of investors that could fortify and elevate digital assets to a more recognized asset class. Conversely, a rejection would probably trigger a short-term downturn, given the prevailing expectations favoring approval and the subsequent positioning of market participants heavily influenced by this anticipation," the analyst noted.

The latest dip in the price of Bitcoin is interpreted by crypto analyst and MN Trading CEO and founder Michaël van de Poppe as BTC seeking support and an entry point for altcoins. He also predicted that a test between $34,888 and $35,200 would strengthen the crypto asset toward the high.

"Bitcoin seeking for support. Scenario is still valid, in which a test around $34.8-35.2K could give further strength towards the highs. These dips are usually entry points for altcoins," the crypto analyst's post on X, formerly Twitter, noted.

The crypto analyst also told his more than 600,000 followers on the social media platform that dips are for buying while corrections are "opportunities as market participants are eager to get themselves into the markets."

Bitcoin, the world's first-ever crypto asset has been slowly erasing its recent gains since Tuesday and was trading in the red zone at $35,778.35 as of 4:19 a.m. ET Wednesday with a 24-hour trading volume up by 32.9% at $24,270,602,319.

BTC's price action has represented a 2.63% dip over the past 24 hours and a 1.5% gain over the last seven days.

Data from CoinMarketCap revealed that Bitcoin's total circulating supply stands at 19,542,800 BTC with its value still falling by 2.66% at a $698,730,903,658 market cap.