K33 Research Predicts 75% Likelihood of Bitcoin Sell-Off Following ETF Verdict
Bitcoin Price Faces Uncertainty as First Spot ETF Approval Approaches
The Bitcoin price may experience a rough period as the approval of the first spot Exchange-Traded Fund (ETF) draws near. While the futures market indicates growing institutional interest, retail investors are showing hesitation to short. However, the strong performance of altcoins could signal a peak or indirectly benefit Bitcoin by diverting retail focus and stabilizing leverage.
The year 2023 has been favorable for altcoins, especially in the fourth quarter. However, this is just a fraction of what a full-blown bull run can achieve. Now that we have entered 2024, the likelihood of an ETF frenzy has changed, raising concerns about a potential sell-off. Many analysts have predicted that Bitcoin might face difficulties in the near future.
As the crypto market prepares for a significant moment with the potential approval of the first Bitcoin spot ETF, K33 Research, a well-known analytics firm, has issued a cautious warning about the exuberant sentiment in the market leading up to the decision.
In a report by K33 Research, it is stated that the final decision on Bitcoin spot ETFs is expected to be announced between January 8 and January 10, with the possibility of impactful news breaking even earlier. Senior Analyst Vetle Lunde highlights a notable trend within the crypto community, which is the ongoing debate about a potential “sell-the-news” response after the ETF approval.
Lunde’s observations indicate that the market is filled with traders who have heavily invested ahead of the verdict. The derivatives market, in particular, shows significant premiums, suggesting high enthusiasm following Bitcoin’s upward trend in recent months.
Lunde’s analysis suggests a 75% probability of a “sell-the-news” scenario, while the chances of approval stand at 20%, with only a 5% likelihood of an outright ETF denial. Despite positive signs from recent regulatory engagements, the market remains speculative.
The analysis also highlights the strong futures market on the Chicago Mercantile Exchange (CME), which reflects a 50% annualized growth. This suggests increasing interest from institutional investors. However, questions arise about the sustainability of this momentum given the rising premiums.
Retail investors, as evidenced by offshore exchange funding rates reaching a yearly peak of 72%, appear to be hesitant to take short positions as the ETF decision approaches. Analysts warn of potential long squeezes due to the aggressive stance of long positions in the market.
Certain altcoins, such as SOL, ORDI, and BONK, have experienced significant growth. While this could indicate a peak in the altcoin market, it may also indirectly benefit Bitcoin. A shift in retail interest towards altcoins could mitigate the risk of major Bitcoin liquidations and create a more stable leverage environment. With Bitcoin currently trading between $40,500 and $43,500, increased volatility is expected as the ETF decision date draws near.
The impending decision on the Bitcoin ETF has generated excitement in the market. However, K33 Research emphasizes the possibility of a market adjustment after the approval, urging caution in navigating this complex crypto landscape.