Bitcoin Faces Decline Amid SEC Review of Spot ETFs

Market awaits Securities and Exchange Commission (SEC) decision on spot ETF applications.

Bitcoin (BTC) experienced a 1.6% decline on Friday as the crypto market eagerly awaited updates from the SEC regarding its ongoing review of over a dozen applications for spot ETFs. The world's leading cryptocurrency dropped to $43,442 by 10:57 a.m. ET.

Analyst Indicates Strong Possibility of ETF Approval in January

ETC Group's Head of Research, André Dragosch, highlighted continued evidence supporting a potential approval of a spot bitcoin ETF in January. Despite a brief pullback, fresh filings from major players such as Grayscale, Ark Investments, Valkyrie, and VanEck signal optimism. Dragosch suggests a 92% probability based on the narrowing discount of the Grayscale Bitcoin Trust to net asset value.

Grayscale Bitcoin Trust Discount Narrows

The Grayscale Bitcoin Trust's discount to net asset value decreased sharply to -5.75%, the lowest in weeks. This narrowing indicates investor belief that the fund may transition into an ETF, eliminating restrictions that have historically kept the discount higher.

Positive Developments Leading to Approval

Meetings between the SEC and major exchanges, coupled with Fidelity's recent registration of securities for a spot bitcoin ETF, contribute to a positive outlook for approval. Dragosch emphasized these factors, indicating ongoing progress towards a favorable decision.

Cryptoasset Sentiment Remains Positive

Despite market fluctuations, ETC Group's Cryptoasset Sentiment Index (CSI) remains elevated. Dragosch pointed out a shift towards positive sentiment, with 12 out of 15 indicators above their short-term trends. Major reversals in BTC put-call volume ratio and exchange inflows further support a positive outlook.

Increased Bitcoin Market Volatility

Concerns about SEC readiness raised earlier this week face challenges. Analyst Eric Balchunas questions the validity of reports suggesting a delayed approval. Market observers expect potential approval orders in the coming week.

Market Prepared for Potential ETF Approval

Bittrex Global CEO Oliver Linch noted that the approval of a spot bitcoin ETF is already factored into market prices. While the immediate impact may not be as dramatic, Linch anticipates cumulative effects, especially when combined with the Bitcoin Halving, leading to a potentially bullish 2024.

While optimism surrounds the potential approval of a spot bitcoin ETF, uncertainties persist. Investors must remain cautious as the market navigates regulatory landscapes. The outcome's actual impact on Bitcoin's trajectory remains unpredictable, emphasizing the need for careful observation in the coming weeks.