Bitcoin (BTC) experienced significant price fluctuations on January 9, ranging between $44,745 and $47,910, as investors tried to confirm the United States Securities and Exchange Commission’s (SEC) post on X (formerly Twitter) suggesting the approval of all spot BTC exchange-traded funds (ETFs). However, the price eventually stabilized around $46,000 after SEC Chair Gary Gensler denied the news. Despite this, investors grew skeptical that the situation could impact the chances of ETF approval by January 10.
Jesse Berger, the author of Magic Internet Money, suggested that the unauthorized SEC post could be used as an excuse to delay the spot Bitcoin ETF. It’s important to note that only the ARK 21Shares Bitcoin ETF has a deadline of January 10, while other issuers such as BlackRock, Bitwise, Fidelity, and VanEck are expecting a final decision by March 15. This difference explains why senior Bloomberg ETF analysts cannot estimate approval odds above 90%, as the regulator may require additional time.
Bloomberg’s James Seyffart also highlighted other factors that could impact the approval of a spot ETF, including a denial by the SEC, although he believes it is unlikely. The possibility of a negative outcome could be based on reasons other than the previously mentioned market manipulation risks, or even a direct order from the administration of U.S. President Joe Biden.
Additionally, Hoeem, author of the “Seven C Newsletter,” pointed out that the event exposes how Bitcoin’s price can be manipulated by a simple post on a social network. This could be used as an argument to deny the ETF, although it is not the author’s base case scenario.
Hoeem’s hypothesis is not far from reality, at least in terms of price, as Bitcoin struggles to maintain $45,000, experiencing a 4.3% decrease from the previous day’s level of $47,000. Furthermore, the Bitcoin futures premium has reached its lowest level in three weeks, indicating reduced demand for leverage longs (buyers).
Data shows that the two-month Bitcoin futures premium has declined to 12% on January 10, matching its lowest level in three weeks. Although it remains above the 10% threshold, this indicates significantly lower demand for leverage longs compared to the levels seen on January 2, which were above 20%. This contradicts the expectation of an 80% approval odds for the spot Bitcoin ETF.
The decrease in the Bitcoin futures premium could be attributed to increased demand to hedge exposure to the Grayscale Bitcoin Trust (GBTC) fund. The shares of GBTC have been trading at a discount relative to the Bitcoin equivalent holdings since February 2021. However, this could change if the SEC approves Grayscale’s spot ETF fund conversion. In such a scenario, GBTC holders would be able to redeem their shares at face value, creating an arbitrage opportunity.
Traders should also analyze options markets to gauge investor sentiment following the recent price correction. The 25% delta skew is a useful indicator, showing whether arbitrage desks and market makers are charging a premium for upside or downside protection. If there is anticipation of a Bitcoin price drop, the skew metric will rise above 7%. Currently, the Bitcoin options delta 25% skew remains within the neutral range, although it is moving closer to the 7% threshold for bearish markets. This suggests that any excess optimism has been erased after the unexpected volatility on January 9.
It is important to note that this article does not provide investment advice or recommendations. Investors should conduct their own research and analysis before making any investment decisions.