Bitcoin ETF Base Case Scenario Presented by Analyst as Big Day Approaches
Expectations are growing ahead of the upcoming decision by the U.S. Securities and Exchange Commission (SEC) regarding the approval of a spot Bitcoin exchange-traded fund (ETF). According to a report by Reuters, the SEC might notify issuers as early as Tuesday or Wednesday this week, giving the green light for the launch of spot Bitcoin ETFs the following week.
Crypto analyst Alex Kruger has presented what he calls a “Bitcoin ETF base case scenario,” which he believes will unfold around January 8-10. In this scenario, if a Bitcoin spot ETF is approved, Kruger predicts an immediate upside move in the price of Bitcoin. He argues that this reaction is already 90% priced in.
Kruger further speculates that after the initial approval, the Bitcoin price might drop below the pre-approval levels leading up to the launch of the ETF, which could occur around two weeks later. However, he notes that this is speculative because no official launch date has been announced yet. Kruger believes it would make more sense for the launch to happen sooner rather than later, given the competitive landscape of ETFs.
In terms of what could follow following the launch of a Bitcoin spot ETF, Kruger anticipates strong inflows or trading volume that would help reestablish the upward trend. However, if the inflows turn out to be weak, prices may fall as early investors sell off their positions.
In the event that the SEC rejects the Bitcoin spot ETF, Kruger predicts a rapid collapse in Bitcoin prices. He advises traders to remain vigilant in January, as it is likely to be a crucial month for the cryptocurrency market.
Bitcoin is poised to finish the year as one of the best-performing assets, outperforming major traditional assets and delivering returns of over 160%, mainly driven by the anticipation of a Bitcoin ETF. The optimism surrounding a spot Bitcoin ETF grew after BlackRock filed for approval, and since then, Bitcoin has experienced a rally from $28,000 to nearly $45,000.
According to Kaiko, despite a relatively lackluster middle of the year, Bitcoin has demonstrated one of the strongest Sharpe Ratios among major assets in 2023, second only to semiconductor giant Nvidia, whose shares soared on the back of artificial intelligence hype.
At the time of writing, Bitcoin was trading at $42,620, representing a 1.2% increase in the last 24 hours.