The cryptocurrency market has been on a roller coaster ride since the start of the year, with Bitcoin prices fluctuating wildly amid speculations about the approval of a spot Bitcoin exchange-traded fund (ETF). A Bitcoin ETF would allow investors to buy and sell Bitcoin through a regulated platform, without having to deal with the complexities and risks of holding the digital asset directly.
🔹What Happened Last Week?
Last week, the market was hopeful about the USA. News that the Securities and Exchange Commission (SEC) will approve the first Bitcoin ETF in the country sparked a surge in Bitcoin prices reaching $45,800, several sources said.
However, the optimism was short-lived, as the SEC did not announce any decision on the ETF applications. Instead, the market witnessed a sharp reversal, with Bitcoin prices plunging by 8% on Wednesday, wiping out the gains from the previous day. The slide was triggered by growing doubts about the likelihood of the ETF's approval, as well as a broader sell-off in the crypto sector.
🔹 Why is the ETF Approval Unlikely?
One of the main reasons why the ETF approval is unlikely in the near term is the lack of a critical requirement that the SEC has repeatedly emphasized: a surveillance-sharing agreement with a regulated market of significant size. This means that the SEC wants to ensure that the Bitcoin market is transparent and fair, and that it can monitor and prevent any fraudulent or manipulative activities.
According to Matrixport, a financial services firm that offers crypto trading, lending, and custody solutions, none of the current ETF applicants have met this requirement. Matrixport expects the SEC to reject all the ETF proposals in January, and possibly extend the review period for some of them.
Matrixport also pointed out that the SEC has recently issued a warning to investors about the risks and challenges of investing in Bitcoin futures ETFs, which are different from spot ETFs. Bitcoin futures ETFs track the price of Bitcoin futures contracts, rather than the actual Bitcoin price. The SEC cautioned that these ETFs may not accurately reflect the value of Bitcoin, and that they may expose investors to additional costs and risks.
🔹 What's Next for the Bitcoin Market?
The Bitcoin market is likely to remain volatile and uncertain until the SEC makes a clear decision on the ETF applications. Traders and investors are closely watching the developments, as the approval of a Bitcoin ETF could boost the adoption and legitimacy of Bitcoin, and potentially drive its price higher.
However, Matrixport advises caution and patience, as the approval of a Bitcoin ETF is not a guarantee of success. Matrixport reminds investors that there are many other factors that affect the Bitcoin price, such as supply and demand, innovation, regulation, and competition. Matrixport also suggests that investors should diversify their portfolio and hedge their risks, rather than relying solely on the ETF outcome.
Bitcoin ETF saga is far from over, and the market is likely to experience more twists and turns in the coming weeks and months. The best strategy for investors is to stay informed, be prepared, and be flexible.
