Bitcoin surged more than 150% in 2023, and that momentum has captured the hearts and minds of Wall Street, sparking a historic rush for its companies to launch their first-ever exchange-traded fund (ETF).
All eyes are now on the SEC's upcoming decision on approval of a spot Bitcoin ETF, scheduled for January 10.
If the past is any indication, the ruling will have a significant impact on Bitcoin's price, although it remains to be seen whether it is positive or negative.
Possibility of price increases
Supporters of a Bitcoin ETF argue that approval by the SEC would open the door to a flood of institutional and retail investments, pushing the price of Bitcoin to new heights.
History offers a glimpse into how expectations surrounding ETFs affect the price of Bitcoin.
In 2017, the price of Bitcoin rose to over $1,400, driven in part by the anticipation of the first Bitcoin exchange-traded fund. This was up from lows in the $600 range just the previous year.
Investors then believed that offering a Bitcoin ETF would make it easier for institutional money to enter the market, leading to a buying frenzy. However, the SEC ultimately rejected the proposal, causing a sharp decline in the price of Bitcoin.
Within days, the price was once again trading below $1,000.
However, ultimately, the arrival of Bitcoin futures would bring new interest in 2017, as the market rose above $20,000 that year.
Elsewhere, we can fast forward to 2021, when Bitcoin will once again rise to all-time highs, reaching over $60,000.
This time, the rally was driven in part by the successful launch of Bitcoin futures ETFs in Canada and Europe. These ETFs allowed investors to gain exposure to Bitcoin without directly holding the cryptocurrency. Anticipation of a similar product in the US contributed to the bullish sentiment.
Finally, following fake news about ETF approval earlier this year, Bitcoin's price rose by several thousand dollars in minutes, a move that suggests potential upside volatility upon approval.
Possibility of lower prices
On the other hand, there are arguments that the approval of a Bitcoin exchange-traded fund could lead to a price correction.
Some market experts fear that ETFs could become a target for short sellers, leading to increased volatility, or that ETFs could be a “news selling event.”
Furthermore, the approval of a Bitcoin ETF could lead to greater regulatory scrutiny of the cryptocurrency market as a whole. This increased oversight could lead to increased taxes, reporting requirements, and potential restrictions on the use of Bitcoin, which could dampen enthusiasm among investors.
Additionally, some believe that the market may have already factored in the possibility of a Bitcoin ETF being approved, and any decision to reject it could lead to disappointment and a sell-off similar to what was seen in 2017 when the Winklevoss Bitcoin ETF was rejected.
The cryptocurrency community is eagerly awaiting the SEC's final decision, but it's essential to remember that it's just one of many factors affecting Bitcoin's price.
Market sentiment, macroeconomic conditions, and geopolitical events will also play their role in shaping the future of the currency.
In conclusion, Bitcoin price is at a crossroads as investors await the SEC's decision on the Bitcoin ETF.
While previous examples have shown that ETF forecasts can have a significant impact on the price of Bitcoin, it is necessary to consider the broader market dynamics. Whether the price of Bitcoin rises or falls after the SEC's decision will depend on many factors, including how the market interprets and reacts to the decision.
While the cryptocurrency world holds its breath, Bitcoin's future remains uncertain, but it is undoubtedly a pivotal moment for the world's only decentralized cryptocurrency.