The phrase “it’s going to be a big week” has never been as relevant as it is this week. January 10th is the deadline for the SEC to make a final decision on the ARKInvest & 21Shares spot Bitcoin ETF — and experts seem to believe they will get approved.
Reports suggest that once approved, the ETFs may go live as soon as January 11th. The week has gotten to an eventful start after the SEC both tweeted and deleted the below tweet in 15 minutes:
“Today the SEC grants approval for #Bitcoin ETFs for listing on all registered national securities exchanges. The approved Bitcoin ETFs will be subject to ongoing surveillance and compliance measures to ensure continued investor protection.”
SEC Chief Gary Gensler was quick to follow up by tweeting that the SEC Twitter account had been compromised, and an unauthorized tweet was posted, underlining that “the SEC has not approved the listing and trading of spot bitcoin exchange-traded products”.
These events caused significant volatility, wiping out millions of dollars in positions, and raising questions about the SEC’s ability to protect investor interests.
Nevertheless, it seems like a matter of time until the ETFs are approved. Steven McClurg, the Chief Investment Officer of Valkyrie Investments was confident in his recent interview with The Block:
“We’re expecting the SEC will deem the ETFs effective at the close of business on Wednesday, and the trading to begin on Thursday morning”.
Time will tell if he was right or not, but let’s explore what the upcoming ETF decision will mean for the market.
So what will the decision mean for Bitcoin’s price and the market as a whole? Let’s have a look at both scenarios, the approval outcome, and the denied outcome.
What does an ETF approval mean for Bitcoin’s price?
A positive scenario starts by getting the ETFs out the door, but it does not end there. Especially after the fake ETF news, I doubt that the market will suddenly skyrocket on news that the SEC has approved spot Bitcoin ETFs for trading.
Here’s the kicker: the more demand for these ETFs, the more Bitcoin will be sucked out of the system – into the hands of BlackRock, Valkyrie and co.
According to McClurg, between $200 and $400 million of investor funds are expected to find their way into Valkyrie’s Bitcoin ETF on the first day, and all ETFs might see a total inflow of between $4 and $5 billion in the first couple weeks.
Standard Chartered, Galaxy, and Cornerstone took it a step further, predicting up to $100 billion in total Bitcoin Spot ETF inflows in 2024, a Coindesk report reads.
All in all, I believe the demand for these ETFs is what will truly matter to the market. Sure, getting a few ETFs is cool, but if nobody shows up to buy them, it might turn out similar to Coinbase taking their company public: a woeful disappointment leading to a market-wide sell-off.
As such, if the ETF gets approved, I’m keeping my eyes and ears open for headlines mentioning record-breaking ETF inflows. The more demand, the higher the market goes (duh).
What happens when the Bitcoin ETF gets denied?
Naturally, the first reaction of the market to such news will be a reaction of disappointment. There will likely be a reasonably sized sell-off, where the market retraces a chunk of the recent upside – which was primarily driven by ETF-induced hope.
While I personally believe the ETFs will get approved shortly, a negative ruling in this matter would not necessarily mean we never get any ETFs. If the SEC announces that they deny the current ETFs, the long list of asset managers interested in launching a spot Bitcoin ETF will probably file new applications – and these may be approved at any minute. As such, while a negative ETF decision will be a significant setback – and the price will react accordingly – it may just be another bump in the road – one that can still lead to ETFs later in 2024, at which point the previous paragraphs come into play once more.
Then there is a group of Bitcoiners that hope the ETFs get denied out of fundamental concern. Bitcoin was invented to protect against governmental overreach and to create financial freedom for anyone – anywhere on the planet.
Many of the ETF applications contain indications that US regulators will have the authority to force the trusts to liquidate Bitcoin, or to seize, confiscate or restrict access to the assets. As such, the ETFs eliminate a major part of the threat Bitcoin currently is to the financial system, a development many Bitcoiners aren’t exactly excited to see happen.
All in all, I believe it is a matter of time until we have a wide range of spot Bitcoin ETFs available for trading. Whether or not these ETFs result in meaningful price appreciation fully depends on the amount of capital that floods into the ETFs.
If the ETFs are denied, it does not necessarily mean we never see a spot in Bitcoin ETF, but I consider it likely that such a scenario is the SEC’s way of kicking the can down the road just a little further.
True Bitcoiners are best off sticking to their guns, holding pure Bitcoin – while the less idealistic speculators and U.S. investors can still invest in a booming market through a government-regulated ETF.
Author's Disclaimer: This article is based on my limited knowledge and experience. It has been written for informational purposes only. It should not be construed as trading or investment advice in any shape or form.
Editor's note: CryptoJelleNL provides insights into the cryptocurrency industry. He has been actively participating in financial markets for over 5 years, primarily focusing on long-term investments in the stock market and crypto. While he watches the returns of those investments roll in, he writes articles for multiple platforms. From now on, he will be contributing his insights for WOO as well.
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