The approval of a spot Bitcoin exchange-traded fund (ETF) by Jan. 10, 2024, appears to be set in stone, with a new spate of ETF updates only adding further to the likelihood of an approval, say K33 research analysts.
In a Dec. 19 report, K33 head of research Anders Helseth and senior analyst Vetle Lunde said the recent round of ETF updates — with filers including BlackRock and ARK Invest now agreeing to a cash-creation setup for their funds — means that an approval is “nailed on” for January.
Additionally, the report highlighted the strength of Bitcoin (BTC) price action over the past week, with analysts noting that spot trading volumes of BTC had been substantially higher than in previous months.
“This is indicative of BTC’s strong rally attracting new buyers while also motivating profit-taking by sellers, leading prices to consolidate on elevated trading volume.”
Despite the strength in Bitcoin spot volumes, the report noted that open interest on BTC perpetual contracts had fallen to new yearly lows, which shows “no signs of retail froth.”
Alternatively, institutional investors on the Chicago Mercantile Exchange (CME) had only increased their appetite for Bitcoin-related risk, with CME open interest growing by 3,100 BTC in the last week.
However, the analysts stated that this was unlikely to be maintained following the approval.
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When the spot ETFs are approved, the analysts predicted a “significant rotation” out of futures-based ETFs on the CME.
“In addition, active traders will probably realize profits on their current long positions. In combination, this creates the setup for reduced CME dominance ahead.”
Altcoin season could be good for Bitcoin
The report also drew attention to several “pockets of euphoria” in altcoins such as Solana (SOL) Ordinals (ORDI) and Bonk (BONK), which have gained 22%, 114% and 338%, respectively, in the last 20 days.
While many market commentators often attribute this type of manic market performance as a sign that the market is nearing the top, the analysts explained this could be a benefit for Bitcoin.
“The altcoin fiesta takes the burden of froth, leaving ‘boring old bitcoin’ less exposed to liquidation cascades. In that sense, altcoins serve as a positive pressure valve for thrill seekers, allowing healthier leverage conditions in BTC.”
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