SEC Decision: Is a Massive Drop in Bitcoin Imminent?
Bitcoin experienced a significant decline on Wednesday, erasing a majority of its early gains for the year. Fadi Aboualfa, the head of research at crypto custodian Copper Technologies, discussed the anticipated increase in volatility in the near future.
A major topic of conversation centered around the impending decision by the Securities and Exchange Commission (SEC) regarding Bitcoin Exchange-Traded Funds (ETFs). Aboualfa shared his thoughts on the expectation of heightened market fluctuations, particularly as the critical date of January 10th approaches. The SEC’s decision on ETFs holds great significance for the cryptocurrency market, and the uncertainty surrounding it is believed to be contributing to the current volatility.
During an interview on Bloomberg Technology, Aboualfa emphasized the importance of this moment in the history of cryptocurrencies. He highlighted how discussions have shifted from questioning the approval of ETFs a year or two ago to predicting when it will happen. Aboualfa pointed out the inevitability of ETF approval, citing major players like BlackRock, who have a successful track record of applications. However, the timing of the approval remains a significant focus for the markets, causing some short-term volatility.
“There is a possibility that Bitcoin could drop as well. It is not unimaginable to see Bitcoin reaching $37,000. Many analysts who observe both traditional and blockchain markets argue that we could witness a correction to $37,000, or even lower. In my opinion, if we consider a return to the mean, one could even argue that it could go as low as $27,000.”
Aboualfa also addressed Bitcoin’s correlation with traditional markets, noting that it is currently trading somewhat like a tech stock. This correlation has been particularly strong since May 2023. Despite this correlation, Bitcoin has shown resilience, especially when compared to recent market movements, such as those in the Nasdaq.
The discussion also delved into the potential influx of investments that could occur once a spot Bitcoin ETF is approved. Aboualfa expressed caution, stating that the crypto market is still in a speculative stage, with a significant amount of leverage in the system. He emphasized the importance of differentiating between short-term traders seeking volatility and long-term investors looking for security in their digital assets.