Approval of Bitcoin ETF Could Spike Prices, But Analysts Warn of Potential Retracement
Analysts are divided on the potential impact of a spot Bitcoin exchange-traded fund (ETF) approval on the cryptocurrency market. While approval could lead to a significant price increase, some analysts caution that it may be followed by a retracement.
A recent surge in Bitcoin’s price was triggered by the listing of BlackRock’s spot Bitcoin ETF ticker on the Depository Trust & Clearing Corporation website. Pseudonymous trader TheFlowHorse believes that this rally provides insight into the potential price action if an ETF is approved.
However, TheFlowHorse also warns that a crowded trade driven by eager investors chasing the news could lead to an eventual retracement. Despite potential price spikes, analysts believe that a full-scale trend reversal for Bitcoin is unlikely due to higher interest rates and the speculative nature of the asset.
The Uncertain Timing of ETF Approval
The timing of a spot Bitcoin ETF approval remains uncertain. While JPMorgan analysts suggest it could happen within the next few months, Bloomberg ETF analysts estimate a 90% chance of approval by January 10 next year.
SEC Chair Gary Gensler’s approach to these applications is still unclear. Some speculate that he may wait until the last minute to deny them. However, regardless of when approval occurs, analysts emphasize that macro changes, such as Fed rate cuts, will have a significant impact on crypto markets.
Hot Take: Approval May Spike Prices, But Caution Is Warranted
While the approval of a spot Bitcoin ETF could lead to a surge in prices, analysts warn against expecting a full-scale trend reversal. Higher interest rates and the speculative nature of Bitcoin limit its ability to support a quantitative valuation like shares or have widespread utilization like commodities.
Investors should approach the potential approval with caution, as a crowded trade driven by eager investors could result in an eventual retracement. Additionally, the timing of ETF approval remains uncertain, with analysts giving varying estimates. Ultimately, macro changes will have a significant impact on the crypto market’s trajectory.
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