Cryptocurrency financial services firm Matrixport said in a new research report that the U.S. Securities and Exchange Commission (SEC) will likely reject all spot Bitcoin exchange-traded fund (ETF) proposals in January.
Initially, there was a strong consensus for approval, but Matrixport has suggested a possible change in course. Meanwhile, this news caused the price of Bitcoin to crash by 6.5% in 20 minutes, dropping from $44,400 to $41,500.
The company also said it might take until Q2 2024 before the regulator approves the first ETF, sending BTC down to $42,500 in the past 24 hours.
Matrixport Says Bitcoin May Retreat To $36-38K If SEC Denies Spot ETF
Bitcoin experienced a significant downswing on Wednesday after crypto financial services firm Matrixport issued a bearish weekly report, predicting that the SEC will likely reject the applications for the spot Bitcoin ETF in January.
Although several firms that filed for a spot BTC ETF have recently updated their applications, Matrixport believes they will “fall short of a critical requirement that must be met before the SEC approves.”
These requirements may be addressed by Q2 2024, but the firm anticipates that no proposal will be approved this month.
Should the securities regulator deny the applications, the market could witness “cascading liquidations as we expect most of the $5.1 billion in additional perpetual long Bitcoin futures to be unwound,” Matrixport noted in the report.
As a result, Bitcoin’s price might see a sharp downturn of 20% and retreat to the $36,000 – $38,000 range.
However, even if the SEC doesn’t approve the spot ETF this year, Matrixport anticipates that Bitcoin (BTC) will conclude 2024 at a higher value than its starting point as US election years and halving events have traditionally boosted the cryptocurrency‘s value.
Bitcoin Remains Narrative-Driven
The latest dip in Bitcoin’s price highlights how deep of an impact a shift in narrative can have on market trends.
Over the past three months, BTC witnessed a surge of nearly 70%.
Although easing macroeconomic conditions and hopes of a dovish pivot by the Federal Reserve also had a positive impact, the bulk of those gains are attributed to growing convictions that an inaugural spot ETF will soon be authorized.
Similarly, Matrixport’s bearish report also made an immediate, albeit negative impact.
According to Reflexivity Research founder Will Clemente, Matrixport’s report caused a wipeout of more than $1 billion in open interest (OI) for Bitcoin futures contracts in a single candlestick movement.
Crypto investor Scott Melker said that the market witnessed $500 million in liquidations in less than an hour, 95% long.
A similar thing happened last year after Bitcoin surged from around $28,000 to $30,000 after a false report of a spot ETF approval emerged on X (formerly Twitter).
