Bitcoin Erases Week’s Gains as Analyst Forecasts SEC Will Reject All Bitcoin ETF Filings

Matrixport analyst Markus Thielen anticipates that the SEC will decline all current Bitcoin spot ETF applications as none of them fulfill the critical requirements that need to be met before the approval.

Bitcoin spot ETF

In a report first seen by the Block, Matrixport analyst Markus Thielen dented market optimism that Bitcoin spot ETF may be just around the corner, suggesting that, contrary to the broad consensus, no application will receive a green light from the Securities and Exchange Commission in January 2024.

“While we have seen frequent meetings between the ETF applicants and staff from the SEC, which resulted in the applicants refiling their applications, we believe all applications fall short of a critical requirement that must be met before the SEC approves. This might be fulfilled by Q2 2024, but we expect the SEC to reject all proposals in January,” the analyst wrote.

After rallying sharply fueled by Bitcoin spot ETF optimism, crypto markets have given up some ground. In the last 24 hours, the bitcoin price has plunged around 6% to $42,000, while Ethereum, Solana, XRP and Cardano are all down between 7% and 11%, according to the data from CoinMarketCap.

According to CoinGlass, today’s price slump triggered over $570 million in long liquidations, including $126 million longs placed on Bitcoin. The largest single liquidation order was a $14.2 million BTC-USDT long on crypto exchange Huobi.

Even so, today’s liquidations are nothing compared to the market storm that could result from the SEC rejecting Bitcoin spot ETF applications, the report suggests. According to Thielen, in such a scenario, the crypto market would see cascading liquidations as $5.1 billion in perpetual long bitcoin futures unwind. This could cause Bitcoin to shed 20%, falling back into the $36,000 to $38,000 range.

Thielen also argued that the SEC Chair Gary Gensler still sees the crypto industry as such that needs more regulatory compliance, so expecting him to vote for Bitcoin spot ETF would be wishful thinking, especially considering that there is no political gain for the government to take any steps that would legitimize Bitcoin as an alternative store of value.

On a brighter note, Matrixport’s outlook for 2024 remains bullish. The analyst anticipates that, given the upcoming elections and the halving event, the bitcoin price would still be higher at the end of the year even if the SEC rejects the ETF.

The approval of a Bitcoin spot ETF has long been hailed as a potential breakthrough for the crypto market, as it would provide exposure to the largest cryptocurrency for numerous retail and institutional investors without the need to worry about wallets, private keys, filing taxes, and cybersecurity threats. With a Bitcoin ETF, one could simply buy shares of it through whatever brokerage they use to buy stocks and trade them the same way.

Beyond any doubt, access to the financial vehicle acts in lockstep with Bitcoin's price swings is an extremely appealing option for many investors, and whoever is first to introduce a Bitcoin ETF would have a tremendous first-mover advantage. Unsurprisingly, the competition is pretty serious, as there are more than a dozen hopefuls, including such Wall Street heavyweights as BlackRock, Fidelity, Ark Invest, Grayscale, VanEck, and Invesco.

Despite the Matrixport’s forecast, traders from the decentralized prediction platform Polymarket foresee a high probability that the Bitcoin spot ETF will launch before January 15. At the time of writing, the “Yes” side of the bet is trading at $0.85, indicating an 85% chance of approval. Earlier, a report by K33 Research suggested that the Bitcoin spot ETF approval would be a sell-the-news event at 75% versus a 20% likelihood, with the remaining 5% chance that it would be denied.