Bitcoin ETF Approval: Crypto Market in Turmoil

The potential approval of the Bitcoin ETF is undeniably generating a fever of anticipation within the crypto community. As the crucial date draws near, crypto analyses are plentiful.

Bitcoin spot ETF approvals most likely a sell-the-news event: K33 https://t.co/4mhZjNvteE

— The Block (@TheBlock__) January 2, 2024

The crypto market is already anticipating the approval of Bitcoin ETFs

For several months now, members of the crypto community have been waiting to learn the final decision of the SEC on Bitcoin ETFs.

Particularly on January 2, the crypto atmosphere seems tense with a more than 5% increase in the price of Bitcoin over the last 24 hours. The price of the crypto has surpassed $45,000.

In the same vein, an analyst from K33 Research (Vetle Lunde) predicts a post-approval sell-the-news scenario with a 75% probability. The futures premiums on the Chicago Mercantile Exchange (CME) indicate a crowded market, suggesting that traders are heavily exposed ahead of the verdict.

The recent trend, characterized by three months of continuous bullish momentum, underlines the anticipation of Bitcoin ETF approvals. However, Lunde warns of froth signs in the crypto market. This is notably illustrated by future premiums reaching annualized levels of 50% on the CME. These indicators suggest a possible squeeze coming to the crypto market following the Bitcoin ETF verdict.

More signs of a bullish market in crypto

The increase in open interest by more than 50,000 BTC over the past three months clearly demonstrates the anticipation of Bitcoin spot ETF approvals. It also raises the issue of rolling costs, with Lunde highlighting a carry cost of 1 to 2% per month on the CME. This is acceptable in the medium term but potentially unsustainable in the long run.

The retail market adds to the fervor, with funding rates on offshore exchanges reaching annualized highs of 72%. Short sellers hesitate to enter the crypto market ahead of the Bitcoin ETF verdict, accentuating the perpetual premium on the spot market and making long positions costly to maintain.

What are the short-term and long-term forecasts?

Analyst Lunde predicts a rise in the Bitcoin price ahead of the Bitcoin ETF verdict. He also warns of significant profit-taking by short-term traders. In the long-term, Lunde is optimistic. He believes that the net influx of fresh money through potential spot ETFs, combined with Bitcoin’s halving in April, could catalyze a new bullish trend.

The critical issue lies in a net influx of at least 50,000 BTC ($2.3 billion) in January to ensure market stability. To be continued…