Matrixport Speculates SEC Rejection of Bitcoin ETF
Matrixport, a crypto-financial service platform, has changed its optimistic stance on the approval of a spot Bitcoin ETF by the US Securities and Exchange Commission (SEC). The firm’s latest report suggests that the SEC may reject any proposals in January.
Anticipation for Bitcoin ETF Approval
The crypto community has been eagerly awaiting the approval of a Bitcoin ETF, which is expected to have a positive impact on the industry and attract mainstream investors. Matrixport and other experts have been bullish on this front.
Gensler’s Hostility towards Crypto
The current leadership overseeing ETF approvals at the SEC is primarily composed of Democrats, including SEC Chair Gary Gensler. Gensler’s negative stance on the crypto sector makes it unlikely that he would support spot Bitcoin ETFs. He believes the industry needs stricter regulatory compliance.
No Incentive to Approve Bitcoin ETF
Considering the political landscape, there is little motivation for the SEC to approve a spot Bitcoin ETF as it would validate cryptocurrency as an alternative store of value.
Potential Cascading Liquidations if Denied
If the SEC denies the Bitcoin ETF, there could be cascading liquidations in the market. Traders have bet heavily on its approval, with an estimated $10 billion in additional long positions linked to this anticipation. A denial could lead to a rapid 20% decline in Bitcoin prices.
Hedging Strategies for Traders
If there is no news of approvals by January 5, 2024, experts recommend traders hedge their long exposure by acquiring $40,000 strike puts for the end of January or consider taking outright short positions on Bitcoin through options.
Hot Take: Matrixport’s Shift in Sentiment
Matrixport, previously optimistic about the approval of a Bitcoin ETF, now speculates that the SEC may reject any proposals in January. The SEC’s leadership, including Chair Gary Gensler, has shown hostility towards the crypto sector. This lack of support and political landscape make it unlikely for a spot Bitcoin ETF to be approved. If denied, there could be cascading liquidations in the market, resulting in a significant decline in Bitcoin prices. Traders are advised to hedge their long exposure or consider short positions on Bitcoin.
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