Spot Bitcoin ETF Approval Might Be Near, but Analysts Differ on Possible BTC Price Reaction

One line of thought envisions a major rally, while another suggests approval has been fully baked into prices.

AccessTimeIconOct 18, 2023 at 7:41 p.m. UTC
Updated Mar 8, 2024 at 5:08 p.m. UTC
  • Bitcoin briefly rallied 7% to $30,000 before retracing on an erroneous news headline of the SEC approving BlackRock's spot BTC ETF application.
  • Price gains could be even larger when a real approval arrives, said one team of analysts, while another outfit suggested approval has been priced in.
  • If prices do jump on a spot ETF green light, it could be a "sell the news" event, suggested Enigma Securities.

Bitcoin's (BTC) violent but short-lived Monday rally on an erroneous news post about a spot BTC exchange-traded fund (ETF) approval offered a dress rehearsal for how the market would react when the real thing happens, analysts say.

"Violent price action on the fake ETF news serves as a timely reminder of what will likely happen upon a decisive verdict on the spot ETF applications," K33 Research analysts noted.

Their report pointed out that BTC shot up 7% to $30,000 from just under $28,000 in eight minutes after the false alarm. The team also noted that bitcoin gained 14% in a week following BlackRock's application for a spot ETF in mid-June.

How the BTC rally unfolded on Monday (K33 Research)
How the BTC rally unfolded on Monday (K33 Research)

"We expect a potential approval to overshadow both these market reactions," said K33, adding that a rejection, conversely, "would likely send the market tumbling."

Alex Krüger, co-founder of investment research firm Asgard Markets, noted Monday in an X post that the market reaction showed that the approval – even though it is largely expected – is not fully baked in the price.

"Whoever thinks the ETF is already priced in has just been proven wrong," Krüger posted. "Expect a +20% day move when approved."

"A measly pump"

Given the extremely low volatility (particularly upward volatility) of late, it's not surprising the bulls got excited on Monday, but Joe Consorti and Nik Bhatia, authors of The Bitcoin Layer newsletter, called it "a measly pump."

"What we experienced was a totally run-of-the-mill intraday price increase for bitcoin, the likes of which we may see on any given Tuesday with a risk-on tone," they said. "This indicates that much of the fanfare and price gains of spot ETF approval is baked into bitcoin’s price already."

Bitcoin, they remind, remains a risk asset, and with higher interest rates likely to lead to a downturn phase in markets, they're not expecting approval to lead to a wave of capital inflows into spot ETFs.

Can the spot BTC ETF be a "sell the news" event?

"The market access benefits here play out over 5 years, not 5 minutes or days."
Joe Edwards, Enigma Securities

If anything, Monday's events highlighted how obsessed market participants are with the spot bitcoin ETF, digital asset brokerage firm Enigma Securities noted in a Wednesday market report.

"The spot ETF is close to the only thing that matters for BTC in terms of positive catalysts," Enigma head of research Joe Edwards said. "Its importance cannot be understated, and as the price action [on Monday] indicated, there is a lot of dry powder waiting to buy into it."

However, a potential approval could well be a "sell the news" event when the real headline flashes, with BTC price shooting up first before declining for a while, Edwards noted.

"We tend to think that markets will spike significantly on the news but could easily then slip afterward," he said. "The market access benefits here play out over 5 years, not 5 minutes or days."

Edited by Stephen Alpher.


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.