Spot Bitcoin ETFs’ impact underestimated by market

gold and silver round coins – A pile of Bitcoin coins. – unsplash

According to crypto research firm K33, the crypto market is significantly underestimating the potential impact of a spot Bitcoin exchange-traded fund (ETF) approval on cryptocurrency prices.

In a market report dated September 5, K33 senior analyst Vetle Lunde and vice president Anders Helseth noted that the likelihood of spot Bitcoin ETF approvals has improved in the last three months. This optimistic sentiment hasn’t been mirrored in the pricing of Bitcoin or other prominent cryptocurrencies.

The analysts clarified that even though Bitcoin had relinquished some of its gains following Grayscale’s legal victory against the Securities and Exchange Commission (SEC), an ETF approval could trigger a substantial influx of investment and greatly amplify buying pressure on Bitcoin.

Conversely, they emphasized that the consequences of a potential spot ETF rejection would be minimal, with Bitcoin prices continuing along their usual trajectory.

Lunde and Helseth further noted that the market’s perspective on ETFs is fundamentally flawed due to the growing probability of spot ETF approvals, as even some Bloomberg analysts foresee a 75 percent likelihood of approval within the year.

“I firmly believe the market is wrong. This is, by all accounts, a buyer’s market, and it’s reckless not to aggressively accumulate BTC at current levels,” said Lunde.

Supporting their optimistic forecast, the analysts pointed to the recent two percent increase in the Nasdaq-100 index, which is frequently seen as an indicator of the broader market’s inclination towards risk-taking.

Furthermore, Lunde and Helseth expressed their positive outlook on Ether’s price, suggesting that ETH is poised to surpass Bitcoin in performance over the next two months. They believe that Ether will benefit from robust momentum leading up to introducing a futures-based ETF.

The analysts drew parallels with Bitcoin’s trajectory, noting that Bitcoin saw a roughly 60 percent increase in the weeks leading up to the launch of the first Bitcoin futures-based ETF on October 19, 2021. The decision on a futures-based Ether ETF is expected to be made in mid-October and is reportedly on track to receive approval from the SEC.

BitMEX co-founder predicts Bitcoin response in 6-12 months

On the other hand, Arthur Hayes, co-founder and former CEO of BitMEX, believes that although Bitcoin has been on a bullish streak for the past six months without a market response, it will eventually respond within the next six to twelve months. Hayes shared his prediction during his keynote speech at Korea Blockchain Week on September 5.

According to Hayes, Bitcoin’s bull run commenced on March 10, coinciding with the Federal Deposit Insurance Corporation’s takeover of Silicon Valley Bank (SVB). The events leading up to this included the liquidation of Silvergate Bank on March 8 and the subsequent closure of Signature Bank by New York regulators on March 12.

In response to these financial developments and to prevent further potential collapses, the Federal Reserve introduced the Bank Term Funding Program (BTFP), which offered banking loans of up to one year in exchange for posting “qualifying assets” as collateral.

Hayes said that both he and the wider market interpreted this as an admission that the banking system’s structural issues were responsible for the problem and that one solution was to increase the money supply.

As a result, he believes that the bull market in Bitcoin began that day, a view supported by the cryptocurrency’s current 26 percent price increase. Hayes contends that this development encouraged traders to consider fixed-supply assets like Bitcoin as attractive options.

However, Hayes noted that the broader market had yet to respond, but he provided a timeline of six to twelve months for this response to occur.

He explained that even if the Fed and other central banks continue with interest rate hikes as part of economic tightening or if they opt to “print more money,” Bitcoin would still perform well. Hayes concluded that the cryptocurrency industry is well-positioned in both scenarios, whether the Fed raises or lowers interest rates.