Here's Why The Bitcoin ETF is Stalling

So here we are Lion’s first few days into the launch of the Bitcoin ETF and things have taken a little bit of a turn to what was expected. Although it is currently the weekend and trading wont commence properly until Monday when markets reopen. But there has still been some significant price action that we’re going to take a look into.

The recent launch of a Bitcoin spot exchange-traded fund (ETF) has triggered a series of events that resulted in a significant price shakeup across the entire crypto currency market. Let’s take a look at what’s happened since the launch and try to come up with what it will look like in the next three months.

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Arthur Hayes Causes Fear

Arthur Hayes issues a warning as he highlights the abrupt 10% drop in the Bitcoin price over a 24-hour period. This plunge has also impacted other top crypto currencies like Ethereum, XRP, and Solana while collectively wiping out around USD 100 billion from the crypto market. The trigger for this downturn, as predicted by renowned crypto trader Arthur Hayes, was a warning from the Federal Reserve.

Hayes, the Chief Investment Officer of family office Maelstrom and former CEO of BitMex had forewarned about a potential 30% Bitcoin price crash citing a "vicious washout" in the coming months.

He attributed this forecast to a "dollar liquidity rug pull." Despite the grim outlook Hayes anticipated a quick rebound underlining Bitcoin's unique position as a neutral reserve hard currency that operates independently of the traditional banking system.

This growth and trust in Decentralised Finance (De-Fi) has been triggering many to invest in decentralised financial assets outside of the current banking system.

The 2022 Bitcoin price crash which erased USD 2 trillion from the market was attributed to the Federal Reserve's response to surging inflation leading to a substantial increase in interest rates and a reduction in its balance sheet.

Securities & Exchange Commission Can't Hold It Together

What we can also see is that the U.S. Securities Exchange Commission Has added to confusion amongst markets with its report of a compromised tweet from the SEC's official account falsely claiming approval for all outstanding applications for a spot Bitcoin ETF. Despite the misinformation, steps taken by the Cboe BZX exchange suggested a potential approval might be imminent.

The drama surrounding Bitcoin ETF approval highlights the regulatory uncertainties in the crypto space. The anticipation and subsequent disappointment resulting from misinformation contribute to the volatility in the market.

In short, the SEC has been unable to provide clarity in it’s stances, responses and actions and at times appears it doesn’t have a hold of it’s own institution. When the peak governing body for crypto currencies (well it wants to be) can’t get it’s $#!7 together, the entire market loses confidence. Once the SEC does finally get moving, we will probably see some good action in this space.

Market Correction as Spot Traders Move To ETFs

Now that the hype surrounding the launch of the first spot Bitcoin ETFs after days of price increases, many crypto currencies including Bitcoin have entered a correction phase.

This article suggests that Bitcoin bears gained strength pushing the crypto to a low of USD 43,135. However, market analysts and experts remain optimistic about the overall near term technical advantage. Citing a continued price uptrend on the daily bar chart.

The role of Bitcoin ETFs is in short term sell pressure as traders rotate from spot Bitcoin to ETFs is being acknowledged with long term potential seen as substantial. In other words the current downtrend is caused by people selling their current spot positions for the new ETFs. Of course seeing reduced prices from all the sales, people will most likely wait for a lower entry level in comparison to their sell spot.

Altcoins faced losses also with approximately 80% of tokens in the top 200 recording declines. The correction led to a 4.72% decline in the total crypto currency market cap that amounts to an USD 80 billion reduction.

Amidst the red some specific altcoins such as FTX Token (FTT) and Helium (HNT) emerged as gainers while others like Bonk (BONK) experienced significant losses.

Future Outlook

The recent price movements of Bitcoin and the broader crypto currency market paint a complex picture influenced by multiple factors including Federal Reserve warnings, regulatory drama and market corrections.

The key to moving forward is understanding that both short term fluctuations and long term potential coexist in this dynamic financial landscape. It really appears that once Spot traders regain their positions in ETFs which will probably commence over the next week and the SEC get’s it together, we will start seeing some improvements in the overall market.

Image sources provided supplemented by Canva Pro Subscription. This is not financial advice and readers are advised to undertake their own research or seek professional financial services.

Posted Using InLeo Alpha