'Buy The Rumor, Sell the News': Crypto ETFs Showcase Market Pattern

By: Isha Das

Notable patterns are emerging in the world of financial assets, such as the surge in asset prices prior to predicted positive events, followed by a slump when the event transpires. Such a pattern, commonly termed as 'buy the rumor, sell the news', sheds light on the strategic interplay between institutional buying and retail investors. In October 2021, the ProShares Bitcoin Strategy ETF (BITO) launch coincided with the peak of the bull market for crypto, attracting a trading volume of over $1 billion and marking a cycle top. The BITI ProShares Short Bitcoin Strategy ETF, allowing investors to bet against Bitcoin, marked a local trough in June 2022 amidst Luna's downfall.

This pattern extends beyond digital assets. For instance, the Gold ETF (GLD) launch in November 2004 opened at around $45, dropping to nearly $41 by May 2005, yet saw an impressive 268% increase over the subsequent seven years. Pundits warn retail investors may fall into a trap if the first spot exchange-traded fund (ETF) is greenlit in the US, predicting volatility for Bitcoin prices and a potential 'buy the rumor, sell the news' event.

Figures suggest 'TradFi' already has a long position in crypto, with asset managers increasing length by about $1bn since September end. As buzz around institutional adoption of Bitcoin continues, experts hint towards a potential decline once the spot ETF is approved.