Potential Bitcoin ETF Approval Could Cause Price Surge, But Market Revival Remains Uncertain
Summary:
The potential approval of a Bitcoin exchange-traded fund (ETF) is anticipated to cause a significant surge in Bitcoin's price, although analysts forecast that it may not fully revive the stagnant markets. This prediction stems from recent price surges triggered by positive developments associated with BlackRock's Bitcoin ETF application. However, analysts warn that, despite possible initial increases, the approval could result in short-term retracements due to overcrowded trades. Different views are emerging on whether there will be a complete trend reversal for Bitcoin, with some suggesting adoption of a cautious approach. The exact timing and certainty of a Bitcoin ETF approval remains uncertain.
The possibility of a Bitcoin exchange-traded fund (ETF) receiving approval could potentially trigger a surge in Bitcoin's price, however analysts fear this might not be enough to effectively warm up the frozen markets. Bitcoin experienced its biggest one-day rally in over a year on October 24, rocketing upwards by over 14% following news that BlackRock's Bitcoin ETF, dubbed IBTC, was listed on the Depository Trust & Clearing Corporation (DTCC) site. This move, interpreted by markets as a positive progression in the ETF application, caused an even stronger spike than the false announcement on October 16 by Cointelegraph that a Bitcoin ETF had received approval.
An anonymous trader known as TheFlowHorse, who has a following of 184,000 on X, commented to Cointelegraph that these two surges could be a preview of Bitcoin price activity if the ETF gains approval. He suggested that a similar, or even more significant, shift could be expected if the ETF is given the go-ahead. Bitcoin's price exceeded $35k on October 24 according to data from TradingView.
However, he warns that, although the ETF approval could potentially instigate a significant price increase, it's likely that this would be followed by a retraction in the medium term. This, he suggests, could happen due to the rush of investors trying to take advantage of the news, creating an overcrowded trade. In his words, "inefficient moves get refilled and retrace to some degree."
Analysts at various institutions weighed in on the possible outcomes. Tony Sycamore of IG International anticipates a continuation of Bitcoin's surge to reach new annual highs on the day of the announcement. Rachel Lucas, a technical analyst at Australian crypto exchange BTC Markets, stated that the endorsement of BlackRock's ETF could trigger a domino effect in the traditional finance sector, potentially increasing both institutional capital inflows and retail interest, applying more pressure to supply limits and underscoring Bitcoin's deflationary aspect.
Despite this, it is not guaranteed that there will be a complete trend reversal for Bitcoin. Sycamore comments that although the surge might remain, interest rates are currently much higher than when Bitcoin achieved its previous record high. Tina Teng, an analyst at CMC markets, suggests adopting a more guarded approach due to the lack of fundamental support for a Bitcoin valuation and its limited scope as a utility, compared with commodities. Even approval from the SEC won't alter its speculative asset nature.
As for when and whether a Bitcoin ETF will gain approval, the guesswork continues. Some ETF analysts hazard a guess that SEC Chair Gary Gensler could keep markets on tenterhooks until the final moment before refusing the pending applications. Analysts from JP Morgan predicted in an investment note on October 17 that ETF approval could be granted in the coming months, while Bloomberg ETF analysts James Seyffart and Eric Balchunas consider chances of approval by January 10 of the coming year to be 90%.
Published At
11/2/2023 5:43:36 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.