Popular Bloomberg ETF analyst Eric Balchunas has lowered the possibility of the US Securities and Exchange Commission (SEC) denying the launch of the Bitcoin spot ETF to 5%. This latest forecast comes as crypto enthusiasts worldwide anticipate a wide-scale approval of various Bitcoin spot ETF proposals by the SEC on Wednesday, January 10.

Why The Bitcoin Spot ETF Approval Appears Nearly Certain: Bloomberg Analysts Weigh In

In October, Eric Balchunas and fellow Bloomberg analyst James Seyffart predicted that there is a 90% chance that ARK Invest and 21 shares would receive approval for their joint Bitcoin spot ETF bid on January 10, which marked the final deadline date for the SEC’s response on their application.

However, in a recent X post on January 6, Balchunas raised the probability of this greenlight to an astounding 95% after declaring that there was only a 5% probability the SEC would reject the ARK/21 ETF bid in the coming days. 

Well said although I probably go with 5% at this point. But you gotta leave a little window open for these things.

— Eric Balchunas (@EricBalchunas) January 6, 2024

This new prediction is based on the implausibility of all scenarios, which could represent a possible delay or non-approval of the ARK/ 21 shares Bitcoin spot ETF application. In an earlier X post on January 6, James Seyffart had listed these scenarios starting with ARK/21 shares spontaneously withdrawing their ETF proposal from the SEC, which he claimed to be highly unlikely. 

Another scenario is that the SEC discovers new reasons to reject the launch of a crypto spot ETF, resulting in a drawn-out court battle between the US regulator and ARK/21Shares, a situation that Seyffart believes the SEC would rather avoid, especially following its recent loud legal loss against Grayscale investment.

The final event that the Bloomberg analyst believes could prevent the clearance of the ARK/21 Shares ETF bid is a direct intervention from the US Presidency, another scenario that appears remotely possible.  

The D-Day Approaches

The importance of ARK/21 Shares’ joint bid to the Bitcoin spot ETF saga revolves around its final deadline date for an SEC response, which is the earliest of the bunch. Now, it is believed that the SEC will rather approve several Bitcoin spot ETF applications at once regardless of their respective final deadline date in a similar fashion as it did with Ether-futures ETFs in August. 

This belief is backed by the discussions between the US regulator and various applicants in the last few weeks, leading to amendments in respective proposals, which indicates the preparation of an incoming approval.

At the time of writing, the set date of expectation remains January 10, with crypto enthusiasts highly enthusiastic about the potential bullish effects of a spot ETF on Bitcoin’s price over the year. Meanwhile, Bitcoin continues to trade at $44,050, having gained by 4.50% in the last week.

BTC trading at $44,038.02 on the daily chart | Source: BTCUSDT chart on Tradingview.com

Featured image from iStock, chart from Tradingview

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The approval of the first spot Bitcoin ETF is just around a week’s time with BlackRock and other big players making a push for the same. While the Bitcoin price made a strong move above $450,000 earlier this week, there’s a strong debate within the crypto community that the ETF approval could be a sell-the-news event.

Selling Pressure After Bitcoin ETF Approval?

K33 Research predicts a decision on Bitcoin spot ETFs between January 8 and January 10, with the possibility of market-moving news breaking earlier. Senior Analyst Vetle Lunde anticipates that, regardless of the timing, approvals are likely to trigger a sell-the-news event.

Lunde notes that traders appear significantly exposed ahead of the verdict, with derivatives showing substantial premiums after Bitcoin’s sustained upward momentum in the last three months. The sell-the-news scenario, according to Lunde, could become a self-fulfilling prophecy as many short-term market participants eye the event for profit-taking.

Lunde assigns a 75% probability to the sell-the-news scenario, a 20% chance of approval, and a 5% possibility of ETF denial, even with recent positive signals from meetings and updated S-1 prospectuses with the Securities and Exchange Commission.

Excessive Froth In the Market

The analyst highlighted indications of market froth, citing a surge in futures premiums on the Chicago Mercantile Exchange, reaching annualized levels of 50%. Institutional participants, anticipating approval, have been increasing their long exposure. The premium represents the difference between the spot price and the futures price of an asset.

Open interest has seen a growth of over 50,000 BTC in the past three months, likely driven by the anticipation of spot Bitcoin ETF approvals. “At current premiums, maintaining CME exposure involves a 1-2% rolling cost each and every month — an acceptable cost of carry over a medium-term horizon ahead of a pivotal event but unsustainable in the long term, particularly as cheaper exposure alternatives arise,” he said.

On the retail side, funding rates on offshore exchanges have reached extremes, hitting an annualized high of 72% during Bitcoin’s recent overnight rally. He added:

“Shorts are reluctant to enter the market with the ETF verdict one week away, increasing perp premiums to the spot market and making longs expensive to maintain. Aggressive leverage from longs may set up the market for long squeezes following the ETF verdict.”

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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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