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The US Securities and Exchange Commission (SEC) will flout market expectations and reject all spot Bitcoin ETF (exchange-traded fund) applications this month, slashing 20% off the Bitcoin price, says Matrixport.
The applications have not yet met the criteria needed for the SEC to grant approvals, said analyst Markus Thielen in a research note on Jan. 2. The Bitcoin price has plunged in the past three hours and is down more than 6% in 24 hours to trade at $42,473 as of 10:10 a.m. EST.
TradingView: BTC/USDT 1-day chart
“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,” he said. “This might be fulfilled by Q2 2024, but we expect the SEC to reject all proposals in January.”
The result of such denials will be cascading liquidations with most of $5.1 billion in “additional perpetual long futures” being unwound, he added. Bitcoin will quickly plunge to the $36-$38k range, he said
If there are no approvals by Jan. 5, Matrixport recommends that traders hedge their long exposure by buying the $40,000 strike puts for the end of January or even going outright short Bitcoin through options, he added.
Matrix on Target projects a January rejection for Bitcoin Spot ETFs by the SEC, cautioning traders to hedge long exposure. With #SEC Chair Gensler’s skepticism towards #crypto, a potential -20% #Bitcoin price drop is anticipated upon #ETF denial, though a positive end-of-2024… pic.twitter.com/IgaMhBJtiP
— Matrixport (@realMatrixport) January 3, 2024
Thielen said it would be ”a very long shot” to expect SEC Chair Gary Gensler to vote for the approval of spot Bitcoin ETFs and, based on comments he made in December, ”he still sees the industry in need of more stringent compliance.”
In addition, he noted that that the regulator’s five voting commissioners are dominated by Democrats.
“From a political perspective, there is no reason to approve a Bitcoin Spot ETF that would legitimize Bitcoin as an alternative store of value,” he added.
JUST IN‼️ – SEC CHAIR GARY GENSLER:
"There's been far too much FRAUD and bad actors in the 'crypto' field…this is the WILD WEST…it's hard for the good faith actors even to compete."#bitcoin, not crypto pic.twitter.com/sMoiCfwlUQ
— Swan (@Swan) December 14, 2023
Bitcoin To Climb In 2024 Even If Spot Bitcoin ETFs Rejected This Month
Thielen’s view comes despite a series of engagements between the SEC and the applicants, led by fund management heavyweights that included BlackRock and Fidelity. This led to multiple amendments to the applications and crypto markets have been buoyant in anticipation of imminent approvals.
Even if the SEC does deny the ETF applications, Thielen still expects the Bitcoin price to be higher by the end of 2024 because US election years and Bitcoin halving years tend to be positive for the king of cryptos, he said.
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