Bitcoin ETF Approval: Analysts Weigh in on Implications
TL; DR
The US SEC Has approved spot Bitcoin ETFs in early January 2024.
The approval of spot bitcoin ETFs may cause the price of BTC to fluctuate between $100,000 and $1 million in 2024.
Grayscale, Blackrock and Fidelity are some of the asset management firms that applied for spot bitcoin ETF in the United States.
Introduction
The second week of January became ground-breaking for the crypto market all thanks to the approval of several spot bitcoin ETFs. This article takes us back a few weeks before the approval, investigating expectations that analysts had before BTC ETFs were greenlighted, and uates the future of crypto post ETF approval.
During the year of 2023 several asset management firms applied to offer spot bitcoin ETFs. At the end of the year the momentum increased as the SEC met with various prospective bitcoin ETF issuers to finalize on the applications.
This analysis will cover the possible implications of the SEC approval of the crypto ETFs.
Going back in time
The world has just witnessed the 15th anniversary of the mining of the genesis block on the bitcoin blockchain. Interestingly, that occurred at the time the price of bitcoin was in an uptrend. However, on 3 January its price plunged to erase the gains of the previous two weeks.
The main reason for that sharp price fall was the rumour about the SEC’s potential disapproval of spot bitcoin ETFs. That led to a 9% drop in the price of the number one cryptocurrency. However, a few days later the market received confirmation that the possibility for the approval of the spot bitcoin ETFs was still high.
Basically, the news of a possible BTC ETF disapproval resulted in over $500 million liquidation in the bitcoin leverage side. During the same week Blackrock seeded its proposed bitcoin ETF with $10 million, Bitwise with $200 million, Hashdex with $200 million and Wisdom Tree with $2.5 million. It is important to note that bitcoin has since rebounded and is trading above $45,000.
Within the first week of January 2023 the technical charts indicated that bitcoin was in an uptrend and its momentum was showing no sign of exhaustion. In fact the bitcoin’s relative strength index was in an overbought zone which influenced further price rises.
Since the RSI shows whether the market is in an overbought or oversold territory it helps crypto traders to determine the time to hold, buy or sell an asset. When the reading is above 50 the bulls have an advantage over the bears. Nonetheless, when the RSI reading is below 50 it’s an indication that the sellers are in control.
The following diagram shows bitcoin’s momentum from October to early January 2023.
BTC/USDT Weekly Chart: TradingView
The bitcoin weekly chart shows that the RSI has been above the 50 mark reading for most of the time, indicating high momentum. Also, there was a clear confirmation in terms of the price action of the trending pattern. The market anticipated that the bitcoin price might keep rising as we approached the possible BTC ETF approval date.
Speculation behind Bitcoin ETF approval
Since October 2023 speculation was high that the SEC would approve spot bitcoin ETFs in early 2024. Eric Balchunas, an ETF analyst, had always maintained that the SEC might approve BTC ETFs in January 2024. And later, he suggested that these crypto ETFs would be approved in the second week of January 2024.
Possible Dates for Approval of BTC ETFs – Xbalchunas
Another analyst, Scott Melker, supported the fact that BTC ETFs would be approved in January. He based his belief on the hearsay about the SEC’s position on the ETFs.
He posted on X, “The rumour mill is going full steam. Have heard multiple times in the past hour that ETFs are being approved, issuers know it and are preparing for next week. Again, rumours… but hearing it everywhere.”
Source: x.com
Commenting on X, Muhmmad Azhar said, “While rumours abound, it seems the murmurs of ETF approval are gaining traction. Issuers are purportedly getting ready for next week. Take it with a grain of salt, but this buzz seems to be circulating far and wide.”
Some analysts like Vetle Lunde reduced the chance of rejection of bitcoin ETFs to 5%. However, for a long time Balchunas predicted a 10% chance of SEC’s rejection of the bitcoin ETFs, as Sai.Tech reported.
5% Chance of Spot BTC Application Rejection - XSaitech
Several asset management firms like Grayscale, Fidelity and Blackrock have applied for spot bitcoin ETF.
BTC Price Forecast – The Path to ETF Approval
As we discussed earlier on, during the first week of January the RSI reading was in the overbought zone, since it was above 50. Thus, it indicated that the market was bullish in the short run.
Also, the technical analysts who use the Elliott Wave theory predicted bitcoin’s continued bullish momentum. Those who use the Elliott Wave theory ascertain the direction of an asset’s price movement based on recurring long term patterns.
By the first week of January bitcoin had completed wave four of the Elliot wave and had formed a parallel channel, thus there was flat correction. Usually a strong upward price movement often follows the correction. The following graph shows the channel that existed during that period.
Bitcoin Price Movement - TradingView
You can see the channel at the end of the existing trend which gives rise to some permutations. If the Bitcoin price breakout it can increase by 15%, taking its value to $50,800. However, the 2.61 external retracement of wave four might offer a stiff resistance.
On the other hand, a breakdown may lead to a 14% drop in the BTC price pushing it down to $37,800. Therefore, traders should wait for the bitcoin to make a breakdown or breakout before they sell or buy BTC.
How ETF Approval Impact Bitcoin Price
The ETF approval is likely to have a significant impact on the price of bitcoin. Various investment analysts have come up with different bitcoin price forecasts following the launch of spot bitcoin ETFs.
Conservative analysts have predicted that the price for bitcoin will range between $42,000 and $100,000 after the ETF approval. For example, Adam Back, the CEO of Blockstream, has predicted that investors are likely to buy Bitcoin for $100,000 a few weeks or months after the approval of bitcoin ETFs. He also believes that the BTC halving event will contribute to bitcoin momentum in 2024.
Read also: Bitcoin Spot ETF Vs. Bitcoin Futures ETF: What’s the Difference?
Nonetheless, some analysts with a more bullish sentiment say that investors will likely purchase bitcoin at a price of between $160,000 and 1,000, 000 by the end of the year. As an example, Anthony Scaramucci, a prominent analyst and crypto investor believes that the BTC price may reach $330,000 during the year.
To this effect, Scaramucci said, “Think of the magnitude of that. If there’s a hundred billion dollars that flows into Bitcoin, the guys at Fidelity think that could have an 11 times factor in terms of valuation, so you could see Bitcoin go from a $600 billion asset to a $6 trillion asset.”
On the other hand, Samson Mow, CEO of Jan3, has predicted that soon people will be able to purchase BTC for $1 million. He believes that the inflow of funds into the asset will likely push its price up. Also, its supply on the exchange may continue to decrease.
Conclusion
During December and the first week of January the crypto market had much anticipation that the SEC would approve spot bitcoin ETF applications in the second week of January. The ETF approval is likely to influence the price for bitcoin to fluctuate between $100,000 and $1 million during 2024.
FAQS about Spot Bitcoin ETFs
Will bitcoin ETF be approved?
The United States Securities and Exchange Commission (SEC) has approved spot bitcoin ETFs during the second week of January 2024. This is because during the fourth quarter of 2023 the SEC had been holding several meetings with the bitcoin issuers and made all the changes the SEC requested.
Is there an ETF that holds bitcoin?
As of January 8 there was no ETF that held bitcoin in the United States. However,since BTC ETFs are now approved, financial institutions and their clients have a fully legal path to BTC acquisition via an ETF.
How do I buy ETF with crypto?
Instead of purchasing ETFs it is best to buy and hold bitcoin and ETH directly. The aim of crypto ETFs is to prevent people from dealing directly with cryptocurrencies but merely giving exposure to them.
