It seems that all applications, for spot ETFs may have been denied. The cryptocurrency market faced a drop yesterday with Bitcoin BTC 1.34% plummeting to around $40,000 and several altcoins experiencing greater declines.
Interestingly there were an altcoins like NS that bucked the trend and actually saw gains. Yesterday Vitalik, the founder of Ethereum ETH -2.15% published an article advocating for layer 2 developers to prioritize the CCIP interest counter and highlighting its significance. This resulted in an increase in something. On the 4 hour chart there is an spike visible. The main reason behind yesterdays market crash was evidently the news circulating on media that the SEC had rejected all spot ETF applications.
Matrixport believes that the current voting committee of five members at the SEC is largely composed of Democrats. SEC Chairman Gensler has not been particularly supportive of cryptocurrencies in the United States. It may be quite unlikely for him to approve a Bitcoin spot ETF soon. While ETFs could potentially bolster the cryptocurrency market Gensler still holds his belief as of December 2023 that the Bitcoin market is still, in its phases and it would not be suitable to greenlight spot ETF applications just yet.
The industry requires compliance measures.
From a political standpoint there is currently no compelling reason to grant approval, for the Bitcoin spot ETF. Such approval would essentially legalize Bitcoin. Establish it as a form of storing value. Since September 2023 investors have been placing bets on the approval of the ETF leading to an influx of $14 billion in fiat currency and a significant amount of leverage into cryptocurrencies. This surge in funds can be attributed to the prevailing climate, influenced by the Federal Reserves dovish stance.
However out of the $14 billion invested in positions around $10 billion was anticipated to be directly linked to ETF approval. If the Securities and Exchange Commission (SEC) rejects this proposal it could initiate a series of liquidations. Matrixport predicts that a substantial portion of the $5.1 billion held in positions will be closed out potentially causing Bitcoins price to decline by approximately 20%.
In such a scenario Bitcoin could retreat back to levels around $38,000 or even $36,000 unless any news regarding approval surfaces before Friday January 5th, 2024. Matrixport suggests considering purchasing put options for $40,000 towards the end of January as a means to hedge against exposure. Additionally they propose exploring shorting options on Bitcoin itself, through financial instruments.The report concludes that even if the US SEC rejects the spot ETF Matrixport still predicts that the price of Bitcoin will exceed $42,000 by the end of 2024.
The approval or rejection of the spot ETF, by the SEC will play a role in determining short term market trends. Based on Bitcoins RSI it currently indicates a need for a price rebound as it sits at a position. Ethereums 4 hour trend chart reveals that its price has recently dropped below the M I 200 moving average marking a deviation since mid October.
Shifting back to cryptocurrency news despite experiencing a sell off yesterday there is still optimism in the market regarding ETF approval. Sources mention that the SEC will hold meetings with applicants today and there is a possibility of approval soon, as tomorrow Friday potentially leading to trading commencing next week. Given market fluctuations it is advisable for investors to exercise caution and consider buying in batches as part of their strategy. While this issue doesn’t focus on altcoins we anticipate promising investment opportunities awaiting us. The upcoming two weeks are moments to watch out for. Allow me to share a piece of news with you.
The released meeting minutes, from the Federal Reserve indicated that Fed officials believe the current interest rate has reached its point in this phase of tightening monetary policy. However future policy decisions will depend on how the US economy develops in the months.
The minutes also mentioned that all officials anticipate a reduction in the federal funds rate by the end of 2024 due to declines in inflation although they did not completely rule out the possibility of further rate increases. The timing for these predicted rate cuts in 2024 was not explicitly provided in the minutes. Market expectations suggest that it could potentially occur early as March. This development is seen as news for the cryptocurrency market as it could lead to increased liquidity and potentially boost risk markets, like the US stock market and cryptocurrencies.