K33 Research analyst Vetle Lunde predicts that the U.S. Securities and Exchange Commission (SEC) may make a decision on the Bitcoin spot ETF between January 8 and January 10. However, the increased derivative premium and market risks make the possibility of a “sell the news” event as high as 75%, with a 5% chance of rejection.
Bitcoin Bubble Signs
Short-term bearish, long-term bullish
According to a report by K33 Research analyst Vetle Lunde, as the deadline for the approval of the Bitcoin spot ETF by the SEC approaches, the market is closely watching for any developments. Lunde predicts that the SEC will make a decision on the Bitcoin spot ETF between January 8 and January 10, but news that could impact the market may be released in advance.
Lunde emphasizes that the approval of the Bitcoin spot ETF could trigger a “sell the news” event, where market participants quickly sell after a major event to make profits. Lunde estimates the probability of this scenario occurring to be 75%, with a 20% chance of price increase after approval and a 5% chance of rejection.
Lunde also points out signs of a market bubble, especially the futures premium observed at the Chicago Mercantile Exchange (CME), which has reached an annualized 50%. In addition, the number of open contracts for Bitcoin has increased by over 50,000 BTC in the past three months, indicating that institutional investors expect the ETF to be approved and have therefore increased their long positions.
At the same time, in terms of retail investors, the funding rate for Bitcoin perpetual contracts has reached an annualized high of +72%. Lunde explains that with one week left until the ETF approval, bears are unwilling to enter the market, which increases the perpetual premium in the spot market and makes the cost for bulls expensive.
In summary, Lunde points out that the Bitcoin spot ETF is highly anticipated, but whether it is over-anticipated will depend on the inflow of funds after the product is launched. He expects the current price surge of Bitcoin to reach its peak on the ETF approval day, due to significant profit-taking by short-term traders and the unsustainability of the premium.
However, in the long run, he is optimistic about the inflow of funds through the potential spot ETF and the supply reduction from the Bitcoin halving event in April, which will further drive the market this year.
Regarding the possibility of the Bitcoin spot ETF being approved in January, Bloomberg ETF analyst Eric Balchunas also expressed a reserved viewpoint.
During an interview with Cointelegraph, Balchunas stated that although the likelihood of rejection is small, if the SEC “needs more time” to consider, it may reject the application for the Bitcoin spot ETF this month. Balchunas and his colleague James Seyffart gave a 90% approval probability, meaning there is a 10% chance of rejection.
However, Balchunas believes that considering the significant amount of time and effort invested by the SEC and the Bitcoin ETF issuers, the likelihood of a direct rejection of the Bitcoin ETF at the last moment is unlikely.
Furthermore, if the SEC does issue a direct rejection, Balchunas believes that the fund issuers may follow in the footsteps of cryptocurrency asset management company Grayscale and file a lawsuit against the regulatory agency.
He said:
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