HomeMost PopularInvesting Examining the Potential Impact of the Proposed Bitcoin ETF Challenging Assumptions Around the...

Examining the Potential Impact of the Proposed Bitcoin ETF Challenging Assumptions Around the New Bitcoin ETF

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The SEC is on the cusp of delivering their decision on the proposed spot bitcoin ETF. Analysts have been quick to predict an inevitable approval. The anticipation has been a driving force behind the significant surges in BTC/USD. With bitcoin reaching around $45k, the disappearance of doomsayers, who previously prophesied its demise, is indeed curious.

Contrary to expectations, a bearish outlook might be sensible amidst the current disappearance of naysayers. The looming approval of a spot ETF could potentially reveal an “Emperor has no clothes” moment in the market, leading to a deep reconsideration of the assumptions underpinning the recent upsurge.

Bitcoin price

The forthcoming spot ETF approval is anticipated to bolster the demand for bitcoin. While this could undeniably unfold, the excessively exuberant rise in BTC/USD appears overblown. The pattern of “buy the rumor, sell the fact” post-approval could likely emerge, sparking a reassessment of the fundamental premises driving the upward trend.

The doubling in BTC/USD rests predominantly on the assumption of a substantial influx of institutional investment in bitcoin. However, skepticism is warranted.

Ownership of cryptocurrencies, once confined to a niche of tech enthusiasts and a few intrigued individuals, has become increasingly mainstream. Accessible wallets and exchanges have normalized bitcoin’s ownership and trade, rendering it as accessible as conventional currencies.

Major U.S. institutions have been actively involved in crypto trading and ownership, raising doubts about a major surge in institutional ownership due to the introduction of an ETF. Furthermore, the impact of fees, a primary concern for institutional traders, cannot be overlooked.

Based on decades of market experience, it’s evident that institutional traders are fee-averse. While Grayscale’s announced reduction of the management fee on the fund is noteworthy, it remains a significant charge for institutions with the capability to establish their own bitcoin trading and storage accounts.

The expected euphoric response in BTC/USD post-news notwithstanding, the sustainability of bullish sentiment remains uncertain. Any post-news pullback could potentially escalate into a significant correction as the basis for the substantial gains in BTC faces scrutiny.

Moreover, the polarization of crypto in the investment landscape—lovers versus haters—hints at the unlikeliness of a significant influx of neutral capital into crypto following the availability of a spot ETF.

An intriguing prospect arises in the event of a post-news drop in BTC/USD. This could present an opportunity for long-term investors, as the impact of Bitcoin’s forthcoming “halving” event, expected in April, could play a positive role in sustaining its price.

Amidst this speculation, it’s crucial to note that a balanced perspective on bitcoin, detached from extreme optimism or pessimism, can facilitate a more prudent assessment of its valuation. An appreciation of the democratization of money while acknowledging the imperative to capitalize on investment opportunities is a pragmatic approach.

It’s essential to discern the potential overvaluation of bitcoin at current levels and adopt a cautiously bearish stance in the short term. However, the long-term bullish influences are anticipated to prop up its recovery to current levels, or potentially higher, by the middle of the year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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