Why is Bitcoin price volatile today?

Bitcoin’s (BTC) price action and frequent fluctuation at the $47,000 level reflects traders’ indecision on Jan. 9. While the market has benefitted from the expectation of a spot BTC ETF approval, there are traders who anticipate the event to be a buy the rumor, sell the news-style event. 

Let’s look into the reasons why Bitcoin price is volatile today.

Spot BTC ETF momentum boosts market sentiment

Despite a bevy of macro headwinds, Bitcoin price continues to push higher, with volatility and open interest increasing. On Jan. 8, all spot Bitcoin ETF applicants officially filed the final step in the process. Now the Securities and Exchange Commission (SEC) is free to potentially approve the spot Bitcoin ETFs.

Former SEC Chairman Jay Clayton noted there is nothing left for the SEC to decide and approval is expected, as a rush of amended S-1s were trickling through on Jan. 9.

While some analysts believe the Bitcoin price is pointing toward a breakout to $50,000, BTC has more than doubled the 2023 returns of gold and the momentum has continued in 2024. MicroStrategy CEO and Bitcoin bull Michael Saylor believes a spot Bitcoin ETF would be the biggest to happen to all finance since the S&P 500 launched.

The positive sentiment around Bitcoin led the BTC market cap to surpass Berkshire Hathaway on Dec. 5, 2023 and it has remained the 10th-biggest asset by that measure. Despite BTC’s strength, the SEC continues to proceed cautiously, reissuing a crypto FOMO warning on Jan. 6. On Jan. 8, the SEC released another warning on crypto, despite approval seeming imminent.

Related: Cory Klippsten’s warning for ‘shitcoin traders’ in the bull market: X Hall of Flame

According to reports, an approval may generate $600 billion in new demand. CryptoQuant analysts believe that an ETF approval will lead to a $1 trillion increase in Bitcoin’s market capitalization. Galaxy Digital predicts a 74% price increase in the first year after a spot BTC ETF launch. Even traditional banks are seemingly bullish on Bitcoin price, with Standard Chartered estimating $200,000 per BTC by the end of 2025.

The final filings required by the spot Bitcoin ETF applicants have highlighted a potential “fee war” emerging, with the institutions all trying to be the lowest. The lowest filed fee sits at 0.2% on Jan. 8.

The fee wars have led to Bitcoin futures open interest on CME reaching new all-time highs. On Jan. 9, there was over $6.28 billion in open interest.

BTC CME Futures open interest has made a new all time high w/ +$0.85B added in the last 4 days.

Open interest now stands at $6.23B going into spot ETF approvals tomorrow. pic.twitter.com/FV5tAjAqUf

— McKenna (@Crypto_McKenna) January 9, 2024

Bitcoin dominated 2023 institutional investor inflows

While some investors may be awaiting increased liquidity and clarity from a spot ETF approval, institutional investors have already begun deploying funds to Bitcoin and crypto. According to CoinShares, institutional investors pushed $2.25 billion into crypto in 2023, which is a 2.7 times increase over 2022. The total year institutional inflow was the 3rd largest on record.

Related: How will Ethereum price react to Bitcoin ETF approval?

Of the $2.25 billion pushed to crypto assets in 2023, over $1.93 billion has flowed to Bitcoin specifically. The total assets under management (AUM) for Bitcoin dwarfs other digital assets with $36.17 billion currently deployed.

Retail Bitcoin interest increases

Institutional investors are not the only investor cohort showing increased interest in Bitcoin. The number of Bitcoin wallets holding non-zero amounts of BTC hit an all-time high on Jan. 2. There are over 51.6 million Bitcoin wallets holding non-zero amounts.

Not only are there more Bitcoin wallets than ever before, but because of consistent month-over-month price growth, BTC’s realized cap increased. The realized cap value on Jan. 8 was $436 billion, which is only 7% shy of the all-time high.

While realized cap is up, active bitcoin supply relative to vaulted supply is down which suggests that holders have yet to release dormant coins into circulation. Vaulted supply shows a bullish trend beyond long-term holders as they are coins that have not moved at all within the BTC network.

The spike in non-zero wallets, vaulted Bitcoin supply and increased realized cap highlights strong bullish optimism.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.