No Spot Bitcoin ETF This Year Say Analysts, As BTC Slumps

Just a few months after crypto investors started betting on the approval of a Bitcoin Spot Exchange Traded Fund (ETF) in the US, leading digital financial services platform Matrixport has suggested in a new report that 2024 may be a little disappointing – prompting a slump in the price of Bitcoin (BTC) today, 3 January.

No ETF in sight

As per the report, analyst Markus Thielen has concluded that it is very unlikely the US Securities and Exchange Commission (SEC) will approve any Bitcoin Spot ETFs in 2024.

Matrixport notes that despite working closely with ETF applicants such as BlackRock and VanEck as well as SEC staff, it believes that a lack of “critical requirement” prevents them from being approved.

Thielen considers the current political landscape in the US as a major factor as to why the SEC and the broader US government don’t fully back Bitcoin Spot ETFs, writing: “The current five-person voting Commissioners leadership critical for the ETF approval of the SEC is dominated by Democrats. SEC Chair Gensler is not embracing crypto in the US, and it might even be a very long shot to expect that he would vote to approve Bitcoin Spot ETFs.”

Matrixport highlighted that interactions observed between applicants and the SEC resulted in firms needing to refile their proposals. It added that, although the “critical requirement” could be met by Q2 of 2024, the odds are that the SEC will not accept proposals this month. 

Bitcoin takes a hit

Matrixport highlights that BTC has performed incredibly well toward the end of 2023, with consolidation laying the groundwork for a good start to 2024. The report states that since September 2023, around $14billion in “extra fiat and leverage” has been added to crypto, $10bn of which Thielen speculates is related to the expectation of an ETF being approved. 

As per data from CoinMarketCap, BTC took a significant hit after rallying above $45,000 a few days before the report came out. At the time of writing, BTC has dropped down to around $42,450. 

Previously, Matrixport was confident that if the January approval window for spot ETFs went well then it would reach a price of $50,000 by the end of the month. 

Despite a previously positive outlook on the market last year that somewhat accurately predicted the upward trajectory of BTC, this latest report has a more bearish outlook than many would have hoped for. 

Matrixport expects that if the SEC continues to deny approvals, a majority of the “$5.1billion in perpetual long Bitcoin futures” could unravel, further declining the price of BTC by 20% back down to as low as $36,000.

On the optimistic side, Matrixport concludes that they remain bullish on BTC ending 2024 at a price higher than the $42,000 it began at. Anticipation for a spot BTC ETF in the US is considered the main driving force behind the success of BTC in 2023, pushing the price of BTC up to levels not seen since spring 2022, gaining over 150% by the end of the year.

Why is a Bitcoin Spot ETF important?

The approval of a Bitcoin Spot ETF would further legitimize the crypto market for both institutional and retail investors. It would attract fresh capital, enhance market liquidity, and provide hesitant or highly regulated entities access to safe BTC/crypto investments 

With greater regulatory oversight and investor protection from fraud, market manipulation and so on, a Bitcoin Spot ETF can bridge the gap between traditional finance and crypto markets.