Bitcoin price plunges 10% due to ETF rejection concerns

quick take

The price of Bitcoin plunged 10% today, falling from $45,426 to $40,870 following Matrixport’s pessimistic report on the SEC’s possible rejection of a Bitcoin spot ETF. The report dampened recent market optimism fueled by expectations of ETF approval, hinting at the possibility of a sharp decline and recommending traders hedge against expected negative outcomes. Nonetheless, Matrixport predicts a long-term bullish trend for Bitcoin.

Bitcoin’s Rollercoaster: The ETF Dilemma and Matrixport’s Pessimistic Forecast

Bitcoin market optimism yesterday The price soared past $45,000. – Highs not seen since April 2022 – today were replaced by sudden despondency. Cryptocurrencies, often praised for their volatility and potential, have undergone significant changes. It plummeted 10% in just two hours, from $45,426 to $40,870.. The causes of this sudden recession are as follows: Report from MatrixportDoubts have been cast over the expected approval of a U.S. Bitcoin exchange-traded fund (ETF).

Report from Matrixport “Why the SEC Rejects Bitcoin Spot ETF Again”, which has quickly become a hot topic of discussion among investors and analysts alike, explains the somewhat bearish outlook on the US SEC’s approval of a Bitcoin spot ETF. This view is especially noteworthy considering Matrixport’s previously bullish stance on Bitcoin. Following the ETF’s approval by the SEC, it is predicted to rise to $45,000 by Christmas 2023 and potentially $50,000 by the end of January 2024.

However, the report highlights several important issues. First, it points to the shortfall of current ETF applications in meeting key requirements of the SEC, a gap that can only be filled by the second quarter of 2024. As a result, Matrixport expects to reject all Bitcoin spot ETF proposals in January. This outlook is consistent with SEC Chairman Gary Gensler’s cautious approach to cryptocurrency regulation. Gensler’s stance, combined with the Democratic-led SEC committee, suggests a reluctance to legitimize Bitcoin as an alternative store of value through approval of a spot ETF.

The ETF story has had a huge impact on market dynamics. Traders have invested at least $14 billion in the cryptocurrency market since September 2023, fueled by hopes of ETF approval. This investment, driven in part by the Federal Reserve’s dovish direction, includes a significant portion of the ETF’s approval. Matrixport’s analysis warns of a potential cascade of liquidations and sharp price declines in the $36,000-$38,000 range if the SEC rejects the ETF application. This scenario could be triggered by the liquidation of $5.1 billion in perpetual long Bitcoin futures.

Matrixport’s advice to traders requires caution. If there is no news of approval by January 5, 2024, we recommend hedging your long-term exposure by purchasing a $40,000 strike put option in late January or selling Bitcoin via options.

Despite this bleak near-term outlook, Matrixport maintains a bullish long-term outlook on Bitcoin. By the end of 2024, the value of the cryptocurrency is predicted to surpass its price at the beginning of the year, $42,000. This optimism is rooted in historical trends, with US election years and Bitcoin mining years generally favoring the digital currency.

The market recovered from today’s lows. $40,870 to $42,200 At the time of publication.

Overall, the Bitcoin market is at a critical juncture between hope and uncertainty. The SEC’s impending decision on a Bitcoin spot ETF will not only impact immediate market action but also set a precedent for the regulatory and political future of cryptocurrencies in the United States. For investors and market observers, the next few weeks promise to be a period of intense research and scrutiny. Possible volatility.

Also Read: The Resurgence of Spot Bitcoin ETF Applications in the Spotlight: Will This Be a Game-Change for Cryptocurrency Investments?