SEC reject spot Bitcoin ETFs proposal in January: Matrixport

SEC reject spot Bitcoin ETFs proposal in January: “SEC Chair Gensler is not embracing crypto in the U.S., and it might even be a very long shot to expect that he would vote to approve bitcoin spot ETFs,” Matrixport said

 SEC to reject spot Bitcoin ETFs proposal in January
SEC Chair Gary Gensler (Pics Credit: Coingape)


Matrixport, a crypto-financial service platform, has expressed strong confidence in the approval of a spot Bitcoin ETF this month.

The firm’s most recent study, however, indicates a shift in mood, suggesting that the US Securities and Exchange Commission (SEC) may reject any plans in January.

Matrixport, a cryptocurrency investing services provider, predicts that the Securities and Exchange Commission (SEC) would reject all applications to market a spot bitcoin exchange-traded fund (ETF) this month.
“The current five-person voting Commissioners leadership critical for the SEC’s approval of ETFs is dominated by Democrats,” the firm noted in a letter on Wednesday. “SEC Chair Gensler is not embracing crypto in the U.S., and it might even be a very long shot to expect that he would vote to approve bitcoin spot ETFs.”

“An ETF would certainly enable crypto overall to take off, and based on Gensler’s comments in December 2023, he still sees this industry in need of more stringent compliance,” Matrixport went on to say. “From a political perspective, there is no reason to approve a bitcoin spot ETF that would legitimise Bitcoin as an alternative store of value.”

The highly anticipated approval of a spot BTC ETF in the United States helped drive bitcoin to levels not seen since April 2022, with the cryptocurrency closing 2023 up roughly 160% for the year.
Matrixport thinks that $10 billion of the additional $14 billion in fiat and leverage poured into crypto since September is attributable to ETF expectations.

Problem for Crypto in January?

The increased anticipation among the cryptocurrency community for the adoption of a Bitcoin ETF has had a significant impact on the industry, which has rebounded from the 2022 dip. An approval could also offer up new opportunities for regular investors to join in the digital asset market.
As a result, various analysts, as well as Matrixport, are fairly optimistic on this front.
However, according to Matrixport’s most recent report, the current SEC leadership handling ETF approval consists of a five-person voting Commissioners team, mostly comprised of Democrats.

Because of his open antagonism towards the crypto sector, SEC Chair Gary Gensler is unlikely to support the approval of spot Bitcoin ETFs. In December 2023, Gensler reiterated his conviction that the industry required improved compliance with stringent regulatory standards.

Given the current political climate, there is little reason to approve a spot Bitcoin ETF, which would validate the cryptocurrency as an alternative store of value.

What if the SEC again denies spot Bitcoin approval?

It is worth noting that traders began betting on the adoption of an ETF in September 2023, resulting in a huge influx of at least $14 billion in fiat and leverage into the market.

According to the report, some of these capital inflows may be connected to more favourable macroeconomic conditions as a result of the Federal Reserve’s dovish approach. However, an estimated $10 billion of the $14 billion in extra long positions could be ascribed to the anticipation of ETF approval.

In the case of an SEC refusal, the research forecasts substantial cascading liquidations, particularly given the likelihood that a major chunk of the additional $5.1 billion in perpetual long Bitcoin futures will be unwound. This scenario could result in a 20% drop in Bitcoin values, bringing them back to the $36,000/$38,000 level.

If no permits are received by Friday, January 5, 2024, experts suggest traders to hedge their long exposure by purchasing $40,000 strike puts for the end of January or consider taking outright short bets on Bitcoin via options.

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