Cryptocurrency

Bitcoin surged, breaking through $45,000 and hitting $47,000, a peak unseen since April ’22. The momentum behind this surge is largely driven by speculation surrounding the potential approval of the first spot BTC exchange-traded fund (ETF) by the Securities and Exchange Commission (SEC). Bloomberg Intelligence analysts project a whopping 95% chance of approval this week, fueling market excitement.

Among major players like Valkyrie, WisdomTree, BlackRock, Bitwise, and others, a fierce fee war has erupted, with fees being slashed to attract investors. Reductions, including ARK and 21Shares dropping from 0.8% to 0.25%, have triggered a competitive environment across the industry, promising reduced costs for potential investors.

As the SEC commissioners’ vote looms, uncertainty shrouds the decision-making process, potentially involving delegated authority. BlackRock has taken the initiative by seeding its fund with the purchase of 227.9 BTC, followed by similar actions from ARK, 21Shares, VanEck, and more, signaling their preparedness contingent on approval.

However, amidst the growing frenzy, the SEC issued a cautionary note against impulsive actions driven by FOMO (fear of missing out). Advocating for thoughtful investment choices, it urged investors to exercise caution and referred them to additional resources. Notably, bitcoin trading volume surged by approximately 100% in the past twenty hours.

Where’s Bitcoin Heading? The analysis of Bitcoin’s price movements indicates a bullish trend. The 9-day exponential moving average (EMA) is positioned below the current trading price at $44,815. However, the daily relative strength index (RSI) suggests a potential crossing into an overbought condition, standing at 65. If the price surpasses the $47,000 mark, it’s likely to continue rising, testing the resistance at $48,400. Conversely, if the price drops below $44,030, it might decline further, testing the support level at $43,750.

U.S. regulators have the crypto world on edge, debating the approval of bitcoin exchange-traded funds (ETFs). Derivatives traders are already diving in, expecting the Securities and Exchange Commission to give the green light, potentially sparking a surge in the market.

Open interest in bitcoin futures, reflecting the invested amount, has been climbing steadily and reached a two-year high of $19.2 billion in early December. It currently sits between $17 billion to $18 billion, a significant increase from the $9.5-$14.5 billion range throughout 2023.

“We’re eagerly awaiting the SEC’s decision,” noted analysts at Amberdata. “This event has been priced into the options market for months now, creating a heightened sense of anticipation.”

The journey toward U.S.-listed spot ETFs tied to the volatile bitcoin has been long and rocky. Multiple asset managers have sought permission since 2013, facing SEC rejections due to concerns about market manipulation vulnerability.

However, intensified discussions in 2023 raised hopes of potential ETF launches, fueling excitement among investors both big and small.

Amidst bitcoin’s climb above $45,000 at the start of the year, funding rates rose, indicating a willingness among traders to pay more to sustain long positions. This enthusiasm coincided with a significant rise in the spot price, spurring high premiums for bitcoin futures.

But caution looms. The bullish sentiment surrounding a potential spot ETF approval might backfire if the decision turns negative, triggering a sell-off. Bitcoin’s recent price drop and subsequent liquidations underscore the market’s sensitivity to news and regulatory shifts.

In the options market, at-the-money implied volatility is currently at its highest level in a year, indicating increased uncertainty. Coinglass’ fear & greed index reflects elevated “fear of missing out” sentiment, signaling heightened market anticipation and risk.

The crypto world buzzed with drama on Friday, fueled by an unverified rumor suggesting the SEC would greenlight Bitcoin ETFs. Instead, attention shifted to an 11-page letter from Better Markets, linked to Sen. Elizabeth Warren and SEC Chair Gary Gensler, cautioning against approving Bitcoin ETFs. Despite concerns, it’s doubtful this letter will derail the approval process, especially as it seems like a rehashed version of an older document.

The prevailing belief is that the SEC, after a court setback, will likely approve a group of filings on January 10, preventing any single Bitcoin ETF applicant from gaining an unfair advantage. However, uncertainties remain: which company will dominate the market—BlackRock, Grayscale, or others—and how an ETF approval will impact Bitcoin’s price.

Opinions diverge on this: the bear case suggests any price increase post-approval is already factored in, leading to a drop once the news is out. On the other hand, the bull case involves the concept of “model portfolios,” where major players like BlackRock may include Bitcoin, potentially boosting its value. Do you lean toward the bullish or bearish scenario for Bitcoin ETFs? Let’s discuss if you have a strong inclination either way.