In the event of an ETF launch, Bitcoin would inevitably face a reality check, triggering a pivot characterized by selling on the news

26 October 2023, Thursday
In the event of an ETF launch, Bitcoin would inevitably face a reality check, triggering a pivot characterized by selling on the news

Bitcoin ETF Potential Approval Sparks Excitement and Uncertainty


Bitcoin’s Recent Surge


Bitcoin, the largest digital currency, has experienced a 16% increase in value this week. It even reached a price of over $35,000 for the first time since 2022. This rise in value comes at a time when global stocks are struggling due to high Treasury yields and geopolitical concerns.


Spot ETFs and Bitcoin Adoption


Many supporters of digital assets believe that the approval of spot exchange-traded funds (ETFs) by companies like BlackRock Inc. will lead to wider adoption of Bitcoin. However, it is uncertain when the Securities and Exchange Commission (SEC) will give its approval. Additionally, recent cryptocurrency failures, such as the bankruptcy of the FTX exchange, have also affected mainstream interest in Bitcoin.


Hayden Hughes, co-founder of the social-trading platform Alpha Impact, predicts that if a Bitcoin spot ETF is approved, there may be a “sell-the-news” event, where investors sell their Bitcoin holdings after the news is announced.


Chart Patterns and Options Bets


Chart patterns suggest that the recent Bitcoin rally may be reaching its limit, while options bets indicate that some speculators believe the token could reach $40,000 before slowing down. As of Thursday morning in London, Bitcoin was trading at $34,490, while other cryptocurrencies like Ether, Avalanche, and Dogecoin were experiencing gains.


Fibonacci Ratios and Bitcoin’s Challenge


Fibonacci ratios, which are used to identify market reversals, suggest that Bitcoin may face a challenge just below $36,000. This level is marked by the 38.2% Fibonacci retracement of Bitcoin’s decline in 2022.


Short-Term Selling and Long-Term Potential


Cici Lu McCalman, founder of blockchain adviser Venn Link Partners, believes that if US spot Bitcoin ETFs are approved, there may be some short-term selling. However, she also sees the approval as a positive development for Bitcoin in the long run.


Bitcoin’s Momentum and Speculation


Bitcoin’s weekly relative-strength index, a measure of momentum, has reached its highest level since 2021. A reading above 70 is considered “overbought,” suggesting that the chances of another rapid rally, like the recent 10% jumps, are reduced.


Caroline Mauron, co-founder of digital-asset derivatives liquidity provider OrBit Markets, suggests that the excitement surrounding the ETF approval may be a result of other positive factors, such as the industry’s recovery from previous setbacks and the narrative of Bitcoin as an inflation hedge.


Bullish Bets and Potential Lawsuits


Data from Deribit, the largest crypto options exchange, shows that there is a significant concentration of bullish bets on Bitcoin reaching $40,000 by the end of the year. This would represent a 16% increase from its current value.


JPMorgan Chase & Co. strategists, including Nikolaos Panigirtzoglou, predict that the SEC will approve multiple spot Bitcoin ETFs by January 10. They also warn that any rejection could lead to lawsuits against the SEC, creating further legal complications for the agency.