The potential approval of a spot Bitcoin (BTC) exchange-traded funds (ETFs) is expected to boost the price of Bitcoin, but some analysts are concerned that it may not be sufficient to completely revive market sentiment.
On October 24, Bitcoin experienced its most significant single-day rally in over a year, with a surge of more than 14%. This rally was triggered by the news that BlackRock’s spot Bitcoin ETFs, known as IBTC, had been listed on the Depository Trust & Clearing Corporation (DTCC) website. This development was seen as a positive step forward for the ETF’s application.
The price surge on October 24 was even stronger than the one on October 16, which was based on incorrect information suggesting that a spot Bitcoin ETFs had been approved.
According to a pseudonymous trader known as TheFlowHorse, who has a substantial following on X, these two market events provide a hint of how Bitcoin’s price may react if a spot Bitcoin ETFs is approved. TheFlowHorse mentioned that investors could expect a move of “the same, if not greater magnitude” if the ETFs is approved.
However, TheFlowHorse also pointed out that while approval is likely to drive prices significantly higher, it might be followed by a retracement in the mid-term due to an influx of eager investors seeking to capitalize on the news.
Analyst view on spot BTC ETFs approval impact
“The timing of spot bitcoin ETFs approvals remains unclear but should happen within months and most likely before Jan. 10, 2024, the final deadline of Ark Invest and 21Shares applications,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a report earlier this month. “This is the earliest among the various final deadlines faced by SEC across spot bitcoin ETF applications.”
However, the general consensus — held by Bloomberg ETFs analysts James Seyffart and Eric Balchunas — is that approval is to be expected early next year.
Despite the generally positive outlook, investors should remain vigilant because an increase in demand for Bitcoin might be transient due to the high interest rates and the current microeconomic factors.
In the current economic environment, it’s less probable for Bitcoin to experience a complete turnaround and enter a prolonged bull market because higher interest rates will affect the attractiveness of alternative investments and influence investors’ decisions, potentially reducing the impact of the approved spot ETFs.
Furthermore, the approval of a spot Bitcoin ETFs is a highly anticipated event, and there’s a possibility that the market has already factored in the price prior to its actual occurrence. As of 2023, Bitcoin has already experienced a remarkable 108% year-to-date increase in its price and it was mainly driven by the expectation of spot ETFs and the halving.
Looking at the broader context, the cryptocurrency market’s performance is intertwined with macroeconomic factors, particularly the increase of interest rates. These adjustments can significantly influence the direction in which the cryptocurrency market moves. So, while a surge in Bitcoin’s price is foreseeable, its sustainability and long-term growth will depend not only on market sentiment but on microeconomic factors.
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