Investors in bitcoin and other cryptocurrencies are closely monitoring the possibility of a near-term approval of a bitcoin spot exchange-traded fund (ETF) by the Securities and Exchange Commission (SEC). Recent reports circulating on social media have raised doubts about the likelihood of this approval, leading to speculation of a subsequent selloff.
Bitcoin’s recent trading activity reflects this uncertainty, with its price dropping to $42,941 after briefly surpassing $45,000 on Tuesday. This marks the lowest level since April 2022, according to CoinDesk data. Share prices of Coinbase Global Inc., a prominent crypto bourse, declined by 2%, while Microstrategy Inc., a software company holding significant bitcoin reserves, experienced a 7% drop.
The recent surge in optimism regarding the SEC’s approval of the spot bitcoin ETF is expected to be put to the test by January 10, a crucial date when the agency is required to make its final decision on the application submitted by ARK Investments and 21Shares. The research report in question argues that this optimism may be premature.
Markus Thielen, head of research at Matrixport, expressed skepticism regarding the near-term approval of a spot ETF in a report published on Tuesday. Despite the “frequent meetings” between ETF applicants and SEC staff, Thielen believes that these applications fail to meet a critical requirement necessary for approval. While this requirement might be fulfilled by Q2 2024, Thielen anticipates that all proposals will be rejected in January.
One key factor contributing to Thielen’s doubts is the composition of the SEC’s five-person voting commissioners, which is currently “dominated by Democrats.” Additionally, as SEC Chair Gary Gensler has not shown support for cryptocurrencies in the United States, the chances of him voting in favor of approving Bitcoin Spot ETFs are considered slim.
Thielen’s thesis has faced criticism on social media, particularly due to Matrixport’s publication of a bullish report on the spot ETF approval on the same day. In response, Thielen acknowledged that his view deviated significantly from the consensus and was not based on insider information from the SEC or potential issuers.
The uncertainty surrounding the approval of a bitcoin spot ETF continues to impact the cryptocurrency market, leaving investors to closely watch for updates and developments from the SEC in the coming days.
The Bitcoin ETF Approval Process: Potential Delays and Market Impact
Expert Predicts Potential Delays in Bitcoin ETF Approval Process
Ian Katz, a policy analyst at Capital Alpha Partners, believes that while a bitcoin spot ETF will ultimately be approved, investors should prepare for the possibility of regulators prolonging the process for several more months. Katz points to SEC Chair Gary Gensler, who has shown no signs of softening his views toward crypto. The analyst suggests that Gensler may subject the ETF approval to further scrutiny, potentially causing delays.
Influx of Funds Tied to ETF Hopes
Thielen, a prominent figure in the cryptocurrency market, highlights the significant amount of money that has entered the crypto space since bets on ETF approval began in September 2023. An estimated $14 billion or more has poured into cryptocurrencies, with at least $10 billion of that attributed to the expectation of an approved ETF. However, if the SEC denies the ETF proposal, Thielen warns of potential cascading liquidations and a rapid -20% decline in Bitcoin prices.
Matrixport Founder Addresses Risks and Market Volatility
Jihan Wu, founder of Matrixport, defends the report released by his company’s analysts. He states that Matrixport analysts operate independently and express their opinions without any interference or influence from management. Wu emphasizes that Matrixport consistently advises clients to be cautious of risks and leverage, especially given the market’s volatility surrounding ETF expectations. This caution is evident in the high funding fees in the perpetual market and the recent decline in crypto-related stocks.
In summary, while the approval of a bitcoin spot ETF is anticipated, investors should brace themselves for potential delays as regulators scrutinize the proposal. The significant influx of funds tied to ETF hopes may result in market volatility and sudden price declines if the SEC decides against approval. Matrixport advises clients to remain mindful of risks and leverage in this dynamic market environment.
