On January 3, Bitcoin faced an abrupt decline, witnessing a more than 10% drop within a 24-hour period and slipping below the $41,000 mark per coin. Just a day before, Bitcoin had achieved a remarkable milestone by surpassing $45,000 per coin, marking a 21-month high and recording a substantial 160% annual gain in 2023.
Market analysts attribute this pronounced volatility in the digital currency realm to prevailing negative sentiments surrounding the potential approval of a Bitcoin spot exchange-traded fund (ETF) during the period between January 8 and 10. The uncertainty and skepticism regarding this approval significantly impacted various cryptocurrencies, leading to a broader market downturn. Notable losses were observed, including Ether falling by over 7%, Cardano (ADA) experiencing an almost 14% decrease, Dogecoin facing a drop of over 11%, and TRON declining by over 5% within a 24-hour timeframe.
Bitcoin Long Positions Liquidated Amid Market Volatility
CoinGlass data reveals a significant upheaval in the crypto market as Bitcoin long positions totaling $104 million faced liquidation within the last hour. The broader impact was even more pronounced, with over $550 million in digital currency long positions liquidated over the past 24 hours. This sudden turn of events underscores the heightened volatility and risk factors at play in the crypto landscape.
The repercussions extended beyond digital assets, influencing related stocks. Coinbase, a prominent cryptocurrency exchange, witnessed a 6.7% drop in its shares before the market officially opened. This correlation emphasizes the interconnected nature of cryptocurrencies with traditional financial markets.
Fadi Aboualfa, the Research Director at Copper Technologies Ltd., shared insights on the evolving landscape. In an email statement, he highlighted the uncertainties looming over 2024, suggesting that the market is entering a phase of evaluating risks across various asset classes. Aboualfa anticipates a potential surge in short-term volatility as investors navigate the intricate dynamics of diverse markets in the coming year.
Matrixport Analyst Predicts SEC Rejection and Bitcoin Price Drop
Amidst heightened anticipation for the approval of the first Bitcoin spot ETF, Markus Thielen, an analyst at Matrixport, has shifted the narrative with a report suggesting a potential rejection by the U.S. Securities and Exchange Commission (SEC). Thielen anticipates that all Bitcoin spot ETF proposals might face rejection in January, delaying final approval until the second quarter of 2024. This outlook has sparked concerns of a significant impact on Bitcoin’s price, with projections ranging between $36,000 and $38,000 in the aftermath of rejection.
Thielen highlights a critical prerequisite for SEC approval that the current ETF applications might not have met, contributing to the expected rejections in January. The market has witnessed a substantial inflow of over $14 billion into digital currency-related assets since traders began speculating on ETF approval in September 2023. Approximately $10 billion of this influx is directly associated with optimistic expectations surrounding ETF approval.
The potential rejection by the SEC is seen as a pivotal factor leading to a market stalemate, with a diminishing likelihood of ETF approval. The skepticism is evident in the weakness of cryptocurrency stocks and the selling off of various U.S.-listed cryptocurrency-related stocks, creating an atmosphere of uncertainty in the market.
Bitcoin Spot ETF Approval: A Decisive Moment for Market Evolution
The prospect of a Bitcoin spot ETF gaining approval in the U.S. holds significant importance in the market’s evolution. Unlike previous cryptocurrency investment tools, a Bitcoin spot ETF is grounded in actual Bitcoin assets, providing traditional capital market investors with a compliant avenue to hold Bitcoin. The attention and speculation surrounding its approval or rejection by the U.S. Securities and Exchange Commission (SEC) have become a focal point for market participants.
The SEC’s historical stance on Bitcoin spot ETFs has been one of reluctance, citing concerns over volatile market prices and perceived inadequacies in investor protection. Instances of rapid market reactions, such as the liquidation of nearly $100 million in digital currency positions due to a false news report, have contributed to the SEC’s cautious approach.
Currently, the SEC has deferred decisions on Bitcoin spot ETF applications from various prominent firms, including WisdomTree, Invesco Galaxy, Valkyrie, Fidelity, VanEck, Bitwise, and BlackRock. The upcoming months, particularly around mid-October and with the final deadline in March 2024, mark a critical period for the review of 11 primary Bitcoin spot ETF applications.
What distinguishes this wave of Bitcoin spot ETF applications is the involvement of mainstream financial investment institutions like BlackRock. If approved, these ETFs could usher in a new era, attracting traditional financial capital into digital currency investments, marking a substantial shift from previous dynamics.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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