Matrixport Report Dampens Hopes for Bitcoin Spot ETFs Approval
Bitcoin, the world’s largest cryptocurrency, experienced a sharp drop of over 9% following a report from Matrixport, a financial services firm. The report, released on Wednesday, delivered a blow to hopes for the approval of Bitcoin Spot Exchange-Traded Funds (ETFs) in the United States by the Securities and Exchange Commission (SEC).
Bitcoin Plunges over 9% as Matrixport Predicts ETF Rejection
The release of Matrixport’s report caused Bitcoin’s value to plummet from over $45,000 to just under $41,000 on Wednesday morning. However, the cryptocurrency quickly bounced back and was trading above $42,000 at the time of publication. Despite the temporary dip, Matrixport’s analysis predicts that the SEC will reject all applications for Bitcoin Spot ETFs in January 2024.
Liquidations Worth $500 Million Spark Turmoil in Crypto Market
The steep decline in Bitcoin’s value also triggered liquidations worth $500 million across various derivatives exchanges, amplifying the tumultuous moment in the cryptocurrency market. The sudden liquidations highlight the high level of volatility and risk involved in trading cryptocurrencies. Traders need to be prepared for significant price fluctuations and take appropriate risk management measures.
SEC’s Political Composition and Gensler’s Approach Impact ETF Prospects
Matrixport’s report points to the political composition of the SEC’s five-person voting Commissioners, which is dominated by Democrats. Additionally, SEC Chair Gary Gensler’s cautious approach to cryptocurrencies has influenced the outlook for Bitcoin Spot ETFs. Gensler’s recent comments indicate a need for more stringent compliance in the crypto industry, making an ETF approval less likely.
Matrixport Warns of Potential Volatility as ETF Approval Hangs in Balance
With the possibility of a rejection of Bitcoin Spot ETFs looming, Matrixport cautions that significant market volatility could be triggered, potentially causing Bitcoin prices to drop by 20% to the range of $36,000 to $38,000. To mitigate the risk, the firm recommends that traders hedge their long exposure by buying $40,000 strike puts for the end of January or consider shorting Bitcoin through options. Despite the short-term uncertainties, Matrixport remains optimistic about Bitcoin’s price by the end of 2024, citing historical trends in U.S. election years and Bitcoin mining years as factors contributing to a positive long-term outlook.
Overall, Matrixport’s report provides a cautious perspective on the future of Bitcoin Spot ETFs, diverging from the general market optimism. The firm’s analysis suggests that the SEC’s decision could lead to significant market volatility and advises investors to prepare for potential price declines. However, their long-term outlook for Bitcoin remains positive, expecting prices to rise by the end of 2024.
Analyst comment
Overall, the news can be evaluated as negative. Matrixport’s report dampened hopes for the approval of Bitcoin Spot ETFs, causing Bitcoin’s value to drop and triggering liquidations worth $500 million. The report also highlighted the political composition of the SEC and Chair Gary Gensler’s cautious approach to cryptocurrencies, indicating that an ETF approval is less likely. Matrixport warns of potential volatility if ETFs are rejected, recommending risk management measures. However, they remain optimistic about Bitcoin’s long-term price outlook.
