Amidst heightened anticipation for the Securities and Exchange Commission’s (SEC) approval of Bitcoin ETFs, Matrixport’s recent report forewarns of a potential rejection, triggering a -20% price drop. This revelation prompts traders to consider defensive strategies as the January 5, 2024 deadline looms.
Matrixport’s Bearish Forecast
In a surprising turn of events, Matrixport, a popular cryptocurrency finance platform, has unveiled a report suggesting that the SEC may once again deny approval for Bitcoin (BTC)Spot ETFs. Contrary to the prevailing optimism in the crypto community, the forecast warns of a substantial -20% decrease in bitcoin price, potentially settling between $36,000 and $38,000.
Matrixport’s foresees liquidations, especially within the $5.1 billion perpetual long Bitcoin futures. As the January 5 deadline approaches without affirmative signals, Matrix on Target advocates a defensive approach for traders. This involves hedging long exposure through purchasing $40,000 strike puts for the end of January or even considering outright short positions in Bitcoin via options.
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Read also: What is a cryptocurrency ETF?
Price Dynamics despite Approval and Concerns Raised
While conventional wisdom assumes a Bitcoin ETF approval would trigger price surges, Matrixport introduces the idea of a potential correction. The report raises concerns about the ETF becoming a target for short sellers, leading to increased volatility or even evolving into a “sell the news” event.
Furthermore, the green light for a Bitcoin ETF could attract heightened regulatory scrutiny across the cryptocurrency market. This regulatory scrutiny might introduce greater taxation, reporting requirements, and potential usage restrictions on bitcoin, potentially dampening investor enthusiasm.
As the final SEC verdict looms, its aftermath will undoubtedly shape the narrative of Bitcoin in the coming days.
BTC’s Price Reaction and Market Impact
The anxiety surrounding the anticipated approval of a Bitcoin ETF manifests in bitcoin’s recent slide. The price experienced a sharp decline that resulted in the liquidation of $500 million worth of positions across derivatives exchanges.
From a high of $45,500 on Wednesday morning, bitcoin plummeted to $40,550 before rebounding above $42,000. The subsequent fallout included a $2 billion drop in open interest due to liquidations and traders reducing exposure on both the long and short side.
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Peter Schiff’s Warning and Investor Sentiment
Adding to the uncertainty, Bitcoin critic Peter Schiff warns of a potential catastrophic impact on BTC’s price if a spot Bitcoin ETF is approved. Schiff contends that the promise of a U.S-listed spot Bitcoin ETF has supported the bitcoin price for years, cautioning that its approval could lead to a collapse in price if anticipated institutional demand falls short.
Schiff’s skepticism, however, is met with responses from BTC proponents who argue that, akin to gold ETFs not hampering real gold’s demand, a spot Bitcoin ETF would only strengthen the BTC market.
As of the latest update, BTC price stands at $43,196, reflecting a -4.48% decline in the last 24 hours, per data on CoinGecko. The $45,000 level remains a critical point for BTC’s upside, with support at the $40 level.
The RSI value on the weekly time frame is 75.3, indicating potential market volatility in the days ahead. As traders navigate these uncertain waters, the Matrixport report serves as a crucial guide, urging caution and strategic planning in the face of possible SEC rejection of Bitcoin ETFs.
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Bitcoin Spot ETF vs. Bitcoin Futures ETF
Credit: Solomon Victor is a Technical Analyst who is also knowledgeable about various aspects of blockchain and cryptocurrency.
