Bitcoin Crashes To $41,500 As ETF Approval Hangs In Balance: Experts
January 03 2024 - 8:00AM
NEWSBTC
As the January 10 deadline for the US Securities and Exchange
Commission (SEC) to decide on a series of spot Bitcoin
Exchange-Traded Funds (ETFs) approaches, the market is rife with
speculation. Initially, there was a strong consensus for approval,
but recent expert analyses suggest a possible change in course.
Meanwhile, the Bitcoin price has crashed by 6.5% in 20 minutes,
dropping from $44,400 to $41,500. 1. Bloomberg’s Insight: A Matter
of Timing, Not Denial Bloomberg’s ETF expert, Eric Balchunas,
assessed a mere 10% chance of the ETFs not being approved,
primarily due to the SEC requiring additional time to review the
proposals. This perspective is critical because it implies that the
SEC is not outright opposed to the idea of a spot Bitcoin ETF, but
is cautious in its approach. Related Reading: Bitcoin ETF: SEC May
Notify Approved Issuers To Launch Very Soon – Here’s When Balchunas
commented, “I would say if we don’t see it in the next two weeks,
it’s more because they need more time,” indicating that a delay in
approval should not be interpreted as a final rejection. His
colleague, James Seyffart, provided further insights, noting,
“Still looking for potential approval orders in that Jan 8 to Jan
10 window. […] We’re focused on these 11 spot Bitcoin ETF filers
[…] Expecting most of these N/A’s to be filled over the next
~week,” highlighting the dynamic nature of the situation. 2.
Matrixport’s Pessimistic Outlook: A Delay To Q2 2024 Matrixport
offers a more cautious outlook, anticipating that the SEC’s
approval of Bitcoin ETFs might be deferred until the second quarter
of 2024. This analysis hinges on a combination of regulatory
challenges and the prevailing political climate under SEC Chair
Gary Gensler‘s leadership. The report states, “The leadership of
the SEC’s five-person voting Commissioners, predominantly
Democrats, influences the decision-making process. With Chair
Gensler’s cautious stance on crypto in the US, it seems unlikely
that he would endorse the approval of Bitcoin Spot ETFs in the near
term.” The firm further explains that despite the ongoing
interactions between ETF applicants and the SEC, resulting in
multiple reapplications, there remains a fundamental requirement
unmet that is crucial for the SEC’s approval. This requirement,
although unspecified in the report, is suggested to be a
significant compliance or regulatory hurdle that could be addressed
by the second quarter of 2024. The potential delay or rejection of
the ETFs, according to Matrixport, could have a notable impact on
Bitcoin’s market value. They predict a possible 20% correction,
with prices potentially falling to the $36,000 range. Related
Reading: Coinbase Custody Head Departs As Crypto Giant Prepares For
Bitcoin ETF Services Furthermore, Matrixport suggests that such an
outcome could lead to a swift unwinding of market positions,
particularly the $5.1 billion in additional perpetual long Bitcoin
futures. The report advises traders to consider hedging their
positions if no approval news emerges by January 5, 2024,
suggesting the purchase of $40,000 strike puts for the end of
January or even shorting Bitcoin through options. 3. Greeks Live’s
Analysis: Decreasing Confidence Greeks Live, focusing on crypto
options trades, has observed a shift in market sentiment, with a
decreased likelihood of the ETF’s passage. They report a
significant decline in the ATM option IV for the week and below 65%
for the January 12 expiration, indicating reduced market
expectations for the ETF approval. The report notes, “Current month
puts are now cheaper, and block trades are starting to see active
put buying, with options market data suggesting that institutional
investors are not very bullish on the ETF market.” A possible delay
or rejection of Bitcoin ETFs carries significant market
implications. The anticipation of ETF approval has been a major
driving force in recent market dynamics, leading to increased
investments. A decision against the ETFs could result in a rapid
unwinding of these positions, potentially causing a sharp decrease
in Bitcoin prices. At press time, BTC had already recovered some of
its losses and was trading at $42,450. This means that the price
has once again returned to the upward trend channel in the 1-day
chart that was established in mid-October last year. Featured image
from Shutterstock, chart from TradingView.com
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