As the January 10 deadline approaches for the US Securities and Exchange Commission (SEC) to decide on a number of spot bitcoin exchange-traded funds (ETFs), the market is rife with speculations.
Initially there was a strong consensus in favor of its approval, but recent analyzes by experts suggest a possible change of course. Meanwhile, the price of bitcoin has plummeted 6.5% in 20 minutes, falling from $44,400 to $41,500.
1. Bloomberg's vision: a matter of time, not denial
Bloomberg ETF expert Eric Balchunas assessed only a 10% chance that the ETFs will not be approved, mainly because the SEC required 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.
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Balchun commented“I would say that 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 definitive rejection.
His colleague, James Seyffart, provided More information, noting: “I am still looking for possible approval orders in the period of January 8-10. (…) We are focused on these 11 one-time bitcoin ETF contributors (…) We expect the majority of these N/A 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 option panoramaanticipating that SEC approval of bitcoin ETFs could be deferred until the second quarter of 2024. This analysis depends on a combination of regulatory challenges and the prevailing political climate under the leadership of SEC Chairman Gary Gensler.
The report states: “The leadership of the SEC's five voting commissioners, predominantly Democrats, influences the decision-making process. With Chairman Gensler’s cautious stance on cryptocurrencies in the US, it seems unlikely that he will support the approval of bitcoin spot ETFs any time soon.”
The firm further explains that despite ongoing interactions between ETF applicants and the SEC, resulting in multiple new applications, a fundamental requirement that is crucial for SEC approval remains unmet. This requirement, although not specified in the report, is suggested to be a major regulatory or compliance hurdle that could be addressed in the second quarter of 2024.
The potential delay or rejection of 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.
Furthermore, Matrixport suggests that such an outcome could lead to a rapid liquidation of market positions, in particular the additional $5.1 billion in bitcoin perpetual long futures.
The report advises traders to consider covering their positions if approval news does not emerge before January 5, 2024, suggesting purchasing $40,000 strike options by the end of January or even selling bitcoin through options.
3. Greeks Live analysis: Confidence on the decline
Greeks Live, which focuses on crypto options trading, has observed a change in market sentiment, with a lower likelihood of ETF approval. They report a significant drop in ATM option IV for the week and below 65% for the January 12 expiration, indicating a lowering of market expectations for ETF approval.
The report notes: “Current month puts are now cheaper and block trades are starting to see active buying of puts, and options market data suggests that institutional investors are not very bullish on the ETF market”.
A possible delay or rejection of bitcoin ETFs carries major implications for the market. Anticipation of ETF approval has been a major driving force in recent market dynamics, leading to increased investments. A decision against ETFs could lead to a rapid liquidation of these positions, which could lead to a sharp drop in bitcoin prices.
At the time of publication, 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 on the 1-day chart that was established in mid-October last year.
Featured image from Shutterstock, chart from TradingView.com
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