Even in a tough year, Bitcoin has managed to appreciate 125% since January. Some of the gains are tied to investors’ hopes that the US will approve the first US spot Bitcoin ETF. But what happens if the SEC denies these requests?
According to ETF experts at Bloomberg, the chance of approval for these ETFs is 90%. In other words, the market is bullish and may have already priced in this approval, but there is still a small chance that it won’t happen.
Therefore, Bitcoin would depend on other stories, such as the halving and the possible rate cut by the Fed. However, no event seems as important as an ETF.
2023 was a trial by fire for Bitcoin
As recently as 2021, the US Central Bank began raising interest rates in an attempt to control dollar inflation, extending the increases for two years. For critics like Nassim Taleb, this monetary pressure would be enough to prove that Bitcoin would meet its end.
Then, the collapse of the Terra cryptocurrency (LUNA) in May 2022 caused a domino effect on the market. By the end of that year, giants like FTX declared bankruptcy, sending both investor confidence and Bitcoin’s price to an all-time low.
In other words, Bitcoin started the year 2023 without any strength. Even with an increase of 65% in the first half of the year, trading volume was still at its lowest level, indicating the lack of interest from the market.
BlackRock’s spot Bitcoin ETF filing appears to have changed that sentiment. Besides BTC continuing its rally after a quarter of decline, even the most skeptical people started investing in the largest cryptocurrency on the market as projections point to a massive inflow of capital.
What if the spot Bitcoin ETF is rejected in the US?
Despite all the investor optimism, there is no guarantee that the SEC will approve spot Bitcoin ETFs in the US. Therefore, it is necessary to analyze and prepare for the worst-case scenario.
Speaking to Coindesk, some analysts made price forecasts for ETF rejections. According to Laurent Kssis, consultant at CEC Capital, Bitcoin could lose its support at $30,000.
“A $25,000 cluster is highly unlikely unless the SEC is categorical, but I have a feeling it will be a return to the forecast table and hope will still be on everyone’s minds.”
Martin Leinweber, product strategist at MarketVector Indexes, believes so “The absence of an ETF would pose a substantial obstacle to the cryptocurrency market”.
“There would need to be a period of adjustment and realignment as the market would have to decouple and forge a new narrative.”
Related to this new story, the halving will take place in mid-April, a month after the deadline for the SEC to approve or reject several ETF applications, including BlackRock’s. However, because the supply reduction would be minimal compared to other halvings, this story is not that strong.
Another event would be the possible rate cut by the Fed, which would cause investors to put their money back into stocks, other currencies, metals and cryptocurrencies. While this could be great for Bitcoin, no one knows when the Central Bank will start these cuts.
The last story would be ETFs again, with new applications after their rejection, which could take months and not have the same force as now.
In any case, investors should take this possibility of rejection into account. After all, a market pullback could be a new entry opportunity, especially for those who are afraid to buy a possible top.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.