As the January 10 deadline for the U.S. Securities and Exchange Commission (SEC) to rule on a slate of spot Bitcoin Exchange-Traded Funds (ETFs) approaches, the market is full of speculation.
Initially, there was a strong consensus in favor of approval, but recent expert analysis indicates a possible change in direction. Meanwhile, the Bitcoin price has fallen 6.5% in 20 minutes, from $44,400 to $41,500.
1. Bloomberg’s Insight: A Matter of Timing, Not Denial
Bloomberg ETF expert Eric Balchunas estimated only a 10% chance that the ETFs would not be approved, mainly because the SEC needed 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, as long as further insights and noted: “I’m still looking for potential clearance orders in the January 8-10 period. […] We are focused on these 11 spot Bitcoin ETF filers […] I expect most of these N/A to be filled in the coming week,” highlighting the dynamic nature of the situation.
2. Matrixport’s pessimistic outlook: a postponement until the second quarter of 2024
Matrixport offers a more cautious policy prospectsanticipating that the SEC’s approval of Bitcoin ETFs could be delayed until the second quarter of 2024. This analysis is based on a combination of regulatory challenges and the prevailing political environment led by SEC Chairman Gary Gensler.
The report states: “The leadership of the SEC’s five-member voting commissioners, mostly Democrats, influences the decision-making process. With Chairman Gensler’s cautious stance on crypto in the US, it seems unlikely that he would endorse Bitcoin Spot ETFs anytime soon.”
The company further explains that despite ongoing interactions between ETF applicants and the SEC, resulting in multiple reapplications, a fundamental requirement critical to SEC approval is still not being met. This requirement, while not specified in the report, is suggested as a major compliance or regulatory hurdle that could be addressed by the second quarter of 2024.
The possible delay or rejection of the ETFs could have a notable impact on Bitcoin’s market value, according to Matrixport. They predict a possible correction of 20%, with prices possibly falling to $36,000.
Furthermore, Matrixport suggests that such an outcome could lead to a quick unwind of market positions, especially the $5.1 billion in additional perpetual long Bitcoin futures.
The report advises traders to consider hedging their positions if no approval news appears on January 5, 2024, suggesting buying $40,000 strike puts before the end of January or even shorting Bitcoin via options.
3. Greeks Live’s Analysis: Declining Confidence
Greeks Live, which focuses on crypto options trading, has done just that noticed a shift in market sentiment, with a reduced likelihood of the ETF’s passage. They report a significant decline in ATM Option IV for the week and below 65% for the January 12 expiration, indicating that market expectations for the ETF’s adoption have declined.
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 will have significant consequences for the market. The prospect of ETF adoption has been a major driving force in recent market dynamics, leading to increased investment. A decision against the ETFs could result in a rapid unwinding of these positions, potentially causing a sharp decline in Bitcoin prices.
At the time of writing, 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 uptrend channel in the 1-day chart established in mid-October last year.
Featured image from Shutterstock, chart from TradingView.com
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