BTC, ETH, and Altcoins Plunge as Matrixport Says SEC Will Reject Bitcoin Spot ETFs
The SEC is widely expected to once again reject proposals for spot Bitcoin ETFs this month. This will dash hopes that 2024 will finally be the year the long-awaited product comes to market.
- According to a research report from Matrixport, the SEC is unlikely to approve any of the Bitcoin spot ETF applications in January.
- The report estimates that up to $10 billion of capital has flowed into Bitcoin futures and other crypto derivatives in anticipation of spot ETF approval.
- Matrixport recommends traders hedge long positions or even go outright short on Bitcoin if no ETF is approved by January 5.
Bitcoin spot ETFs have been hotly anticipated since the first proposals were submitted to the SEC years ago. Thus far, the SEC has rejected every application, though Chairman Gensler has provided a roadmap of regulatory changes he would like to see before approval.
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SEC approval of a Bitcoin ETF could be a big win
Despite Bitcoin rallying to over $45,000 in 2024, regulatory uncertainty remains a significant headwind. The crypto markets have reacted violently to previous ETF rejections.
While SEC approval would represent a major win for crypto legitimacy, it does not appear the stars have fully aligned in 2024. The SEC is led by a Democratic majority under Chair Gary Gensler, who has taken a cautious stance on cryptocurrency regulation.
“SEC Chair Gensler is not embracing crypto in the US, and it might even be a very long shot to expect that he would vote to approve Bitcoin Spot ETFs,” says a Matrix report.
Approving a Bitcoin ETF could be seen as endorsing crypto as a legitimate asset class. Political motivations may also play a role, as legitimizing Bitcoin through an ETF could position it as an alternative store of value competing with the U.S. dollar. There are no compelling reasons for the administration to encourage that, according to Matrixport.
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Bitcoin reverses course following the news of the ETF rejection
Following the report by Matrixport, the crypto market is bleeding red with a 7.81% drop in the global crypto market cap. Bitcoin has plunged by more than 7% to hit $42,000 alongside Ethereum, which exhibited a 7.3% loss. Altcoins like Solana, XRP, Avalanche, Chainlink, and many others exhibit single and double-digit losses.
2024 began on a positive note as Bitcoin breached the $45,000 level in anticipation of the spot Bitcoin ETF approval. However, the latest market conditions depict how negative news can affect the whole market.
