Bitcoin futures will lose their appeal as investors wait for BTC ETF approval
Bitcoin (BTC) price fluctuated between $44,745 and $47,910 in less than 30 minutes as market participants tried to confirm the United States Securities and Exchange Commission's post on X (formerly Twitter) about BTC exchange-traded funds (ETFs) on January 9. ) are approved.
Bitcoin prices eventually settled around $46,000 after SEC Chairman Gary Gensler dismissed the news, but investors are skeptical that the situation could reduce the chances of the ETF's January 10 decision being approved.
The impact of the SEC debacle on the chances of approval of Bitcoin's spot ETF
As Magic Internet Money writer Jesse Berger explained on X, the “unauthorized” post by the SEC could be used as an excuse to delay the Bitcoin ETF space.
Somehow they use hacking of @SECGov account as an excuse to delay ETF https://t.co/IXUOd3L403
— Jay Berger (@jayberjay) January 9, 2024
One should note that the only ETF with a January 10 deadline is the ARK 21Shares Bitcoin ETF, while other issuers such as BlackRock, Bitwise, Fidelity and VanEck wait until March 15 for a final decision. This difference explains why Bloomberg ETF analysts are high. It is not possible to estimate the probability of approval above 90% as the inspector may request additional time.
Other factors cited by Bloomberg's James Seifert include the SEC's denial of a spot ETF, though it seems unlikely in his view. The basis of the negative results could include other factors, if not the risks of market manipulation mentioned earlier or some kind of direct order from the administration of US President Joe Biden.
I went one step further and wrote that the event was posted on social media and revealed how the price of Bitcoin is being “fixed”; This can also be used as an argument to reject the ETF. Although the author does not have such a situation as a basic issue.
:
– The SEC had no reason to deny the ETF.
– The SEC does not want to approve ETFs.
– SEC account “hacked”.
– Gary said Twitter was “unauthorized”.
– The value of Bitcoin is “loaded”.
– Gary's main supporter is on ETFs…
— hoeem (@crypthoem) January 10, 2024
Hoeem's hypothesis is closer to reality than one might think, at least in terms of value, as Bitcoin is struggling to maintain $45,000, down 4.3% from $47,000 the previous day. But, more importantly, the Bitcoin futures premium fell to its lowest level in three weeks, indicating low long-term (buyers) interest.
Bitcoin derivatives show a decrease in demand for bullish positions
Professional traders choose monthly futures contracts due to the lack of financial volume, which ensures a longer settlement period as these instruments can be 5% to 10% higher than regular spot markets.
The two-month Bitcoin futures premium (base rate) fell to 12% on January 10, matching a three-week low, the data showed. Although it remains above the 10% threshold, the index reflects much lower longs (buyers) interest compared to 20% above January 2 levels. This is not what one would expect if the odds of the Bitcoin ETF approved for the position stand at 80%.
Bitcoin futures premium may be affected by increased interest in hedging exposure of the Greyscale Bitcoin Trust (GBTC) fund. The shares have been trading at a discount to their Bitcoin equivalents since February 2021, but that will change if Greyscale's spot ETF fund conversion is approved by the SEC. GBTC holders can eventually redeem their shares for cash, so the arbitrage opportunity is to hedge the exposure by buying the fund's shares and selling the same in BTC futures.
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Traders should analyze the options markets to understand whether the recent price correction has caused investors to become discouraged. A 25% delta skew is a sign that arbitrage desks and market makers are overpaying for background or downside protection. In short, if traders anticipate a drop in the price of Bitcoin, the skewness measure will increase by more than 7%, and happiness levels will have a negative 7% skew.
As shown above, Bitcoin options delta 25% skew remains in neutral territory, although it is close to the 7% threshold for bear markets. Essentially, both BTC futures and options indicate that any excessive optimism has dissipated after the unexpected volatility on January 9th.
In terms of Bitcoin derivatives markets, it would be far fetched to assume that the market confirmation odds have fallen below 80%, but it is certainly less bullish compared to last week.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
