Financial News Agency (Hong Kong) reported that on Tuesday (January 2) in the European market, Bitcoin was close to breaking through $46,000 in the short term, and the price of the currency reached a high of $45,922 on the crypto exchange Bitstamp. Bitcoin spot ETFs have been receiving positive news frequently, and Reuters hinted that the US Securities and Exchange Commission may notify issuers as early as Tuesday or Wednesday that it will approve the issuance of Bitcoin spot ETFs this week. Although the signal has not been officially confirmed, the Bitcoin bullish financing rate has reached 66%, a record high.
Reuters quoted people familiar with the filing process as saying that issuers who submit revised S-1 documents before the end-2023 deadline are expected to launch their issuance plans before January 10, the date on which the U.S. Securities and Exchange Commission must approve or reject the Bitcoin spot ETF application submitted by Ark Funds and 21Shares joint venture.
Sources said the SEC could notify issuers as early as Tuesday or Wednesday that they have permission to launch a bitcoin spot ETF this week. "If regulators choose to approve a bitcoin spot ETF, they could notify issuers as early as this week," Reuters wrote.
Bitcoin bullish financing rate reaches 66%, setting a new record high
As Bitcoin surpasses $45,000 for the first time since April 2022, it has become more expensive than ever to hold long positions, or leveraged bullish bets, in the perpetual futures market associated with Bitcoin. The annualized growth rate of the global average perpetual funding rate for Bitcoin rose to a record 66% during the Asian trading session, according to data tracked by cryptocurrency service provider Matrixport.
Perpetual contracts are futures with no expiration date, using a funding rate mechanism to keep the price of the perpetual contract in sync with the current market price of the cryptocurrency. A positive funding rate means that the perpetual contract is trading at a premium to the spot price, and longs are paying shorts to keep their positions open. A negative rate suggests that this is not the case, and exchanges collect funding rates every 8 hours.
“The funding rate hit a new high of 66% during the Asian session on Tuesday,” said Markus Thielen, head of research and strategy at Matrixport and founder of 10x Research. “This means that longs have to pay shorts 66% per year to stay long.”
The chart shows that funding rates remained high throughout the 2023 year-end holiday period, indicating bullish market sentiment.
“Surprisingly, Bitcoin funding rates have remained elevated during the holiday period, suggesting that crypto traders have been very optimistic and anticipate imminent approval of a Bitcoin spot ETF,” Thielen noted.
Note that when the market stops moving higher, ultra-high funding rates tend to become a burden for longs, leading to the unwinding of bullish bets and price pullbacks.
Currently, Bitcoin has not shown signs of bullish exhaustion, with prices exceeding $45,000. The cryptocurrency rose by more than 56% in the last quarter of 2023 amid market speculation that the U.S. Securities and Exchange Commission will approve one or more Bitcoin spot ETFs.
Bitcoin challenges $48,000 price target
“Bitcoin is trading like an ETF is going to be approved,” noted Scott Melker, a trader, analyst and podcast host.
When analyzing order book changes, well-known crypto trader Skew noted that there was some selling, but the volume was relatively small.
“Since spot selling began, prices have stagnated, viewing the previous high of $44,400 as an important area for decline,” he wrote.
CoinTelegraph reported that bets on price increases after the approval of the Bitcoin spot ETF are largely concentrated at $48,000.
Those who bet on Bitcoin have not suffered major losses despite the fact that Bitcoin has risen 8% in 2024. According to the latest data from statistical resource CoinGlass, only $38 million of Bitcoin shorts have been liquidated.
As mentioned above, the funding rates on various exchanges are extremely high, suggesting that people generally believe that the Bitcoin spot ETF event will trigger a rise in advance.
Meanwhile, short liquidations across cryptocurrencies reached $62 million.
Still, Skew noted that “early” shorts were caught by surprise during the move above $45,000, and that perpetual swap traders were ill-prepared for the price rally.
He commented: “So what is clear is that the perpetual market in general is underexposed to the current spot-driven moves, meaning there will be a volatile feedback loop as perpetuals lag spot prices, especially around $45,000.”
