Analyst Predicts SEC Rejection of Bitcoin ETFs in January, Anticipating Market Fallout
In stark contrast to the prevailing market consensus, Matrixport analyst Markus Thielen foresees a scenario where the Securities and Exchange Commission (SEC) rejects all proposals for bitcoin spot exchange-traded funds (ETFs) in January.
Despite ongoing interactions and updated S-1 prospectuses exchanged between applicants and the SEC in recent weeks, Thielen highlighted a crucial deficiency in these applications, a prerequisite that must be satisfied before SEC approval can be granted.
Thielen grounded his viewpoint on the intricate political dynamics and compliance-related apprehensions. He contended that, while an ETF could potentially catalyze the adoption of cryptocurrencies in the United States, the SEC's chair remains cautious, viewing the industry as requiring more rigorous compliance measures.
In a report, Thielen expressed doubt about SEC Chair Gensler embracing the crypto sector in the U.S., suggesting that expecting him to vote in favor of approving bitcoin spot ETFs might be overly optimistic. He conveyed, "This may materialize by Q2 2024, but our projection is for the SEC to rebuff all proposals in January."
Citing recent comments made on CNBC, Gensler articulated his concerns about widespread fraud and illicit activities in the crypto space, emphasizing non-compliance not only with securities laws but also with anti-money laundering regulations and measures aimed at safeguarding the public from malicious actors. Despite persistent efforts from prominent asset managers like BlackRock, Fidelity, Franklin Templeton, Valkyrie, and VanEck, among others, hoping to secure SEC approval, Thielen remains skeptical of a positive outcome this month.
In the event of an SEC denial in January, Thielen anticipates a domino effect of liquidations, with billions of dollars in perpetual long bitcoin futures unwinding. This, he suggests, could trigger a substantial drop in the price of bitcoin, potentially around 20%, revisiting the $36,000 to $38,000 range.
As of now, bitcoin is trading at $44,562, registering a 5% increase since the beginning of the year and a notable 65% surge over the past three months, according to The Block’s price page. Despite the short-term volatility that may ensue following an SEC denial, Thielen maintains a bullish outlook for 2024. Drawing insights from historical trends in U.S. election years and Bitcoin mining cycles, Matrixport predicts that bitcoin's value will surpass its starting point of $42,000 by the year-end, providing a positive perspective for long-term investors amid the prevailing regulatory uncertainties.