Bitcoin ETF: what should traders expect?

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Key points:

  • US regulators are reviewing applications to issue Bitcoin exchange-traded funds (ETFs).
  • The premium for Bitcoin futures on the CME has reached a record high.
  • However, some market watchers warn that negative news about spot ETFs could trigger a wave of selling.

US regulatory uncertainty keeps cryptocurrency market in suspense as investors await ETF decisions.

While regulators grapple with whether to approve bitcoin exchange-traded funds (ETFs), derivatives traders are betting on a green light from the Securities and Exchange Commission (SEC) as early as this week.

Open interest, the amount of money invested in bitcoin futures, has been steadily rising since October, peaking at $19.2 billion in early December, the highest level in two years. However, it has since settled to a range of $17 billion to $18 billion, down from the $9.5 billion to $14.5 billion seen throughout much of 2023.

The journey to US-listed spot ETFs has been a long and arduous one, with the goal of providing traders with direct access to cryptocurrency through traditional stock exchanges and attracting institutional investors.

As we already have told, since 2013, several asset managers have applied for permission to launch spot Bitcoin ETFs, but these applications have been repeatedly rejected by the Securities and Exchange Commission (SEC), which has expressed concerns about the products’ susceptibility to current market conditions.

However, as lobbying efforts intensified towards the end of 2023, the SEC held discussions with firms interested in issuing ETFs, raising hopes that these long-awaited funds could finally hit the market and fuel a wave of Bitcoin investment.

The ups and downs of Bitcoin

Bitcoin funding rates have surged across major exchanges, reflecting the growing enthusiasm of traders to maintain bullish positions. This trend has persisted since October, according to Coinglass, indicating a sustained bullish sentiment among market participants.

The upward momentum in funding rates coincides with the recent surge in spot Bitcoin prices, which surpassed the $45,000 level on January 2, extending its remarkable 170% growth in 2023.

This surge has ignited a wave of excitement among both retail and institutional investors, with premiums for Bitcoin futures on the Chicago Mercantile Exchange (CME) reaching record highs.

“CME’s first-month BTC premium has averaged 42% since the year opened, marking a new all-time high indicating a massive shift in long positions in the market at this time,”

– said K33 Research analysts.

Despite the prevailing bullish sentiment, market observers warn that negative news regarding spot ETFs could plunge the cryptocurrency market into a selling frenzy.

Echoing these concerns, Jag Kooner, head of derivatives at Bitfinex, cautioned that even the approval of a spot ETF could lead to a price correction as investors seize the opportunity to cash out their gains. This highlights the market’s heightened sensitivity to news and regulatory developments.

Fear of missed opportunities

Amidst the soaring prices and growing anticipation for spot ETFs, the fear of missing out (FOMO) phenomenon is taking hold among traders.

The Coinglass Crypto Fear and Greed Index, a gauge of market sentiment, has reached a two-month high and has consistently remained in “greed” territory over the past 30 days. This suggests that traders are increasingly gripped by FOMO, leading them to rush into the market in a bid to avoid losing out on potential gains.


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