Anticipated Bearish Impact of Potential Spot Bitcoin ETF Approval Likely To Be Short-Term, Says Cathie Wood
Cathie Wood, the CEO of ARK Invest, believes that the approval of a spot Bitcoin exchange-traded fund (ETF) in the US will have a negative effect on the price of Bitcoin. In an interview with CNBC, Wood explains that investors who are eager to take profits will “sell on the news” once securities regulators give their approval for the highly anticipated investment product.
The sell-on-the-news trading strategy is based on the concept that asset prices tend to increase in anticipation of positive news or announcements. Wood acknowledges this phenomenon and expects the price of Bitcoin to temporarily decline as holders sell for profit.
However, Wood emphasizes that this will be a short-term occurrence. She believes that a favorable decision from the Securities and Exchange Commission (SEC) will act as a green light for institutions that have been hesitant to invest. The institutional push is expected to have a significant impact on the price of Bitcoin.
Wood highlights that Bitcoin’s limited supply will further drive up its price as institutions enter the market. With only 19.5 million Bitcoins currently in circulation and a maximum cap of 21 million, she predicts that the scarcity value will come into play.
Hot Take: Favorable SEC Decision Could Trigger Institutional FOMO
If the SEC approves a spot Bitcoin ETF, it may initially lead to a short-term bearish impact on the price of Bitcoin due to profit-taking by investors. However, Cathie Wood believes this will be temporary. The approval would serve as a signal for institutions to enter the market, potentially triggering a significant increase in demand and driving up the price of BTC. With trillions of dollars in assets waiting to be allocated, even a small percentage of institutional investment could have a substantial effect. Additionally, Bitcoin’s limited supply will contribute to its price appreciation as institutions recognize its scarcity value. Overall, Wood remains optimistic about the long-term prospects for Bitcoin, despite any short-term market fluctuations.
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