Bitcoin Faces Resistance at $44,000 Amid Rising ETF Approval Prospects
Summary:
Bitcoin's (BTC) price, for the first time since April 2022, crossed $40,000 but its surge to a resistance level of $44,000 was more challenging than predicted. This upheaval coincided with increased prospects of a spot Bitcoin exchange-traded fund (ETF) approval by January. Companies like BlackRock have altered their filings to comply with cash redemption models required by securities regulators. While there's speculation about a price crash post ETF approval, some traders foresee significant gains before the regulatory nod and a positive longer-term outlook. Future premiums and options markets are also being closely monitored. Regulatory uncertainties persist with recent SEC denial to Coinbase's petition on cryptocurrency rulemaking, causing some investor restraint.
For the first time since April 2022, Bitcoin's (BTC) value soared past the $40,000 mark approximately two weeks ago on December 4. However, despite the initial surge towards $44,000 within 48 hours, that resistance level turned out to be tougher than anticipated, leaving industry spectators wondering if a drop to $41,000 is imminent.
Over the past 16 days, Bitcoin faced numerous dismissals at $44,000, but frequently returned to test the $41,000 support, coinciding with an increasing likelihood of a spot Bitcoin exchange-traded fund (ETF) being approved by this January. This expectation comes after several issuers revised their filings to conform to a cash redemption model demanded by securities regulators. Companies such as BlackRock were among those that updated their S-1 registration statements to exclude non-monetary payments (known as 'in-kind') leading to ETF shares being created and redeemed solely in cash, despite the fund's ability to hold actual cryptocurrency.
The anticipated approval of the spot Bitcoin ETF raises questions in the trading community about a potential impact on Bitcoin's price. Some speculate that the listing of the spot ETF might follow a 'buy the rumor, sell the news' pattern, meaning that any significant gains could occur before the official regulatory approval.
One trader, @BritishHodl, on a social media platform suggested that the price of Bitcoin would experience a quick increase followed by a substantial decline upon approval of the spot ETF. However, the trader also added that a true valuation should be anticipated three months after the approval, suggesting a positive long-term outlook.
Observing the Bitcoin futures premium, commonly referred to as the 'basis rate', can provide insight into whether larger investors and market makers remain optimistic. On neutral days, these contracts typically trade at a 5%-10% premium to accommodate for the extended settlement period.
Since December 1, the Bitcoin futures premium has been trading above the 10% neutral-to-bullish threshold, showing robust demand for leverage long positions. This shows that traders have maintained their optimism despite multiple rejections at the $44,000 price point, and the recent correction on December 21 fails to indicate otherwise.
Investors are also leveraging options markets to assess whether recent declines have impacted trader confidence. Balanced demand between put and call options for BTC could be due to regulatory uncertainties.
Although investor enthusiasm over the possible approval of a spot Bitcoin ETF is prevalent, crypto exchanges continue to face significant regulatory risks. The U.S. Securities and Exchange Commission (SEC) recently rejected Coinbase’s request for rule making on cryptocurrency, asserting that existing regulations are adequate.
Owing to this regulatory ambiguity, the $44,000 resistance level is further reinforced. However, Bitcoin's performance this year has seen a staggering surge of 164% compared to the 23.2% hike of the S&P 500 index, prompting some cryptocurrency profit-taking.
Yet, Bitcoin whales, as indicated by BTC derivatives metrics, don't seem perturbed by the most recent dismissal, leaving room for additional growth prior to a potential spot ETF approval.
Please note that this article does not provide investment advice or recommendations. All investments and trading actions involve risk, and everyone should perform their own research prior to making a decision.
Published At
12/22/2023 12:06:25 AM
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