The world's largest cryptocurrency by market capitalization fell 0.7% over the past 24 hours to $27,088 at 11:40 a.m. ET, according to CoinGecko.
MicroStrategy also fell 2.2% to $373.89. The bitcoin-related stock had climbed 10.8% after the U.S. appeals court opinion sided with Grayscale Investments in its case against the Securities and Exchange Commission.
CryptoQuant data analyst Adam Mourad advised a cautious perspective in view of Tuesday's ruling.
"The cryptocurrency landscape is still subject to a dynamic interplay of various factors, including regulatory developments, market sentiment and macroeconomic trends," he told The Block.
Bitcoin hits 'critical testing ground'
Mourad said bitcoin's recent price breakout pushed the digital asset through a support level characterized as the Short-Term Holder Realized Price, which aligns with the average acquisition price for bitcoin held by holders who've owned the asset for less than 155 days.
As the price peaked above this level, short-term holders came into profit, leading to increased sell pressure. According to the data analyst, the juncture is "a critical testing ground for both support and market sentiment."
Mourad also cited recent exchange outflows of BTC as being "common during periods of financial uncertainty." According to the analyst, more than 20,000 bitcoins were transferred off exchanges and into cold wallets after the recent price spike.
"This maneuver can be interpreted as an attempt to shield invested capital from ongoing market instability," Mourad added. He said the recent price action shows investors are waiting for more favorable market conditions before executing sell orders.
Bitcoin open interest spikes
Conversely, Mourad said he considered the recent spike in bitcoin's open interest "as a constructive gauge of sentiment."
In the hours following the Grayscale news, bitcoin's open interest witnessed a surge of around $700 million.
"This meteoric rise in open interest underscores the market's swift and robust reaction to the verdict, indicating a collective sentiment of bullishness and anticipation," Mourad said. He added that within this open interest uptrend, there was a noticeable influx of long positions.
"The addition of long positions is a clear indicator of market participants' confidence in the future trajectory of bitcoin and the broader cryptocurrency market," he added.
Flowdesk co-founder Guilhem Chaumont highlighted another bullish signal.
"Building of financial products on top of bitcoin, such as ETFs, should be more straightforward now," he said in a note sent to The Block. "We would not be surprised to see this as the first in a series of positive news about regulatory adoption in the U.S. We are confident that the regulatory landscape in the U.S. will be clarified over the next months allowing institutional adoption at a larger scale."
Grayscale win re-evaluated
Berenberg Capital Markets analyst Mark Palmer said the ruling does not necessarily clear the way for the first spot bitcoin ETF in the U.S.
"The panel did not compel the SEC to approve a spot bitcoin ETF but rather ordered the commission to revisit the arguments it used to support its rejection of Grayscale's application," he said in a note. "As such, we believe it is quite feasible that the SEC will craft alternative arguments to justify continued rejections of spot bitcoin ETF applications based on concerns specific to the spot bitcoin market."
The SEC has the option to appeal the three-judge panel's ruling. The commission has 45 days to request an en banc hearing in which all 17 judges of the U.S. Court of Appeals for the D.C. circuit would review Tuesday's decision.
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