K33 Research analyst Vetle Lunde predicts that the SEC may make a decision on the Bitcoin spot ETF between January 8th and 10th. However, the increased derivative premiums and market risks make the possibility of a “sell the news” event as high as 75%, with a rejection possibility of 5%.
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As the deadline for the Securities and Exchange Commission’s (SEC) approval of the Bitcoin spot ETF approaches, the market is closely watching for any developments. Vetle Lunde, an analyst at K33 Research, pointed out in a report yesterday that the SEC is expected to make a decision on the Bitcoin spot ETF between January 8th and 10th, but news that affects market sentiment may be released in advance.
Lunde emphasized that the approval of the Bitcoin spot ETF could trigger a “sell the news” event, where market participants quickly sell to profit from significant events. Lunde estimates that the probability of this situation occurring is 75%, with a 20% possibility of price increase after approval and a 5% possibility of rejection.
Lunde also pointed out signs of a market bubble, especially the futures premiums observed at the Chicago Mercantile Exchange (CME) reaching an annualized 50%. Additionally, the number of open Bitcoin contracts has increased by over 50,000 BTC in the past three months, indicating that institutional investors anticipate the approval of the ETF and have therefore increased their long positions.
At the same time, for retail investors, the funding rate of Bitcoin perpetual contracts reached a peak annualized rate of +72%. Lunde explained that with one week remaining until the ETF approval, bears are reluctant to enter the market, increasing the perpetual premium in the spot market and making the cost for bulls expensive.
In summary, Lunde pointed out that the Bitcoin spot ETF is highly anticipated, but whether it is overly anticipated will depend on the capital inflow after the product is launched. He expects the current Bitcoin price surge to reach its peak on the ETF approval day, due to significant profit-taking by short-term traders and the unsustainability of premiums.
However, in the long term, he is optimistic about the inflow of funds through potential spot ETFs, coupled with the supply reduction from the Bitcoin halving event in April, which will further drive the market this year.
Regarding whether the Bitcoin spot ETF will be approved in January, Bloomberg ETF analyst Eric Balchunas also expressed a reserved view. In an interview with Cointelegraph, Balchunas stated that although the possibility of rejection is smaller, if the SEC “needs more time” to consider, the application for the Bitcoin spot ETF may be rejected this month. Balchunas and his colleague James Seyffart give a 90% approval probability, meaning there is a 10% chance of rejection.
However, Balchunas believes that considering the significant amount of time and effort invested by the SEC and the Bitcoin ETF issuers, the possibility of a direct rejection at the last moment is not high.
Furthermore, if the SEC does make a direct rejection decision, Balchunas believes that the fund issuers may follow in the footsteps of Grayscale, a cryptocurrency asset management company, and file a lawsuit against regulatory authorities.
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