Price Consolidation and Profit Taking
Bitcoin’s climb higher took a breather on Monday as the top cryptocurrency slid below $37,000. Traders continued to take profits following last week’s surge to a new 2023 high near $38,000. The speculation around the approval and launch of the first spot Bitcoin ETF continues to drive the price action. Analysts believe that approval could come as soon as Friday, and most expect approval by mid-January. Bitcoin traded around support at $37,000 over the weekend, with bulls attempting to push the price higher but being rejected below $37,500. This led to a pullback to $36,550. Bulls have since regained some lost ground and are currently battling bears for control of the price at $36,648.
Bitcoin’s Market Dominance Decreases
Bitcoin’s dominance, measuring its market capitalization against the total digital asset market, decreased for the second consecutive week to approximately 52.3%. This reduction reflects the ongoing dispersion of liquidity among more speculative assets, indicating investor confidence and trust in the market. Trading activity continues to climb, with the daily cumulative volume on centralized exchanges reaching $31.4 billion. This is the highest level since the end of March and further confirms the uptrend driven by robust trading activity.
Traditional Finance’s Involvement in Bitcoin
Traditional finance is becoming increasingly involved in Bitcoin. The BTC open interest on the Chicago Mercantile Exchange (CME) exceeded 100,000 contracts, surpassing Binance and becoming the leading venue in terms of open interest for BTC. This strong presence of traditional finance investors is also evident in the narrowing discount of the Grayscale Bitcoin Trust (GBTC), currently at 10.3%, the lowest level since August 2021. This increase in traditional finance activity underscores the confidence market investors currently hold regarding a future BTC Spot ETF approval.
SEC Decision and New ETF Filings
The Securities and Exchange Commission (SEC) has a deadline of January 10 to make a decision on the ARK 21Shares Bitcoin spot filing application. There is a strong likelihood that the SEC will make a definitive decision before this date to avoid providing any issuer with a first-mover advantage. Additionally, there have been new filings for digital asset spot ETFs, including Blackrock’s submission for an ETH Spot ETF. The surge in price and trading activity, coupled with the decrease in the GBTC discount and the net inflow observed in ETPs with digital assets as underlying, suggests that market investors are placing their bets on approval.
Potential Impact of Approval or Rejection
If the SEC approves the BTC Spot ETF, it would likely draw significant investments from traditional finance, elevating digital assets to a more recognized asset class. On the other hand, a rejection could trigger a short-term downturn given the prevailing expectations favoring approval. Economist and crypto skeptic Peter Schiff predicted a Bitcoin crash before or after the ETF launch, disagreeing with his followers’ responses.