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Anticipated SEC Approval of Bitcoin ETF Yields Understated Market Response, Data Shows

In this post:

  • Despite the potential approval of the first spot Bitcoin ETF in the US, options data indicates a subdued market response, with implied volatility for relevant options declining, suggesting the news has already been priced in by investors.
  • Bitcoin’s price is expected to see only modest gains following the ETF approval, with predictions of a steady market phase before any major rally, hinting at a more gradual long-term growth trajectory for the cryptocurrency.

 

 

As the cryptocurrency community anticipates the potential launch of the first spot Bitcoin ETF in the US, a recent analysis of options data reveals a surprisingly muted market reaction.

Despite expectations that the U.S. Securities and Exchange Commission (SEC) might approve Bitcoin ETF applications as early as next week, the market seems to have already priced in the possibility, leading to a decline in implied volatility for the relevant options.

Bitcoin ETF news and its underwhelming market impact

Contrary to what might be expected, the news of impending Bitcoin ETF approvals, possibly by Tuesday, January 2, has not spurred significant volatility in the crypto market. The subdued reaction is reflected in the options market, where data from Greeks. Live indicates minimal changes in both major term implied volatilities (IVs) and prices, even amid rumors of the SEC’s approval. Specifically, the implied volatility for January 12 options, closely linked to the ETF decision, has seen a decrease rather than an increase, with trading volumes for these options being notably low and constituting a mere 2% of the day’s total turnover.

The lack of market excitement suggests that investors may have already factored in the potential ETF approval, dampening expectations of any major price rallies following the SEC’s decision. The limited activity in the options market underscores a cautious sentiment among investors, who seem to be anticipating the approval but not betting heavily on its market impact.

Bitcoin price outlook: Modest gains expected

Currently, Bitcoin is trading at an amount of $42,255 with a market capitalization of $827 billion. While approving a Bitcoin ETF could provide some sort of upward momentum, market analysts, including Michael Van de Poppe, suggest that any gains are likely to be capped. Van de Poppe predicts that Bitcoin could potentially reach a high between $48,000 to $52,000, but he anticipates a subsequent period of sideways movement and range-bound price action. The forecast points to a stable phase for Bitcoin following the ETF news, with expectations for a new all-time high being set for late 2024.

The cautious outlook, considering both the market data and analyst predictions, indicates that while the approval of a Bitcoin ETF is a significant development for the crypto community, its immediate impact on Bitcoin prices might be more restrained than initially anticipated. The market is bracing for relative stability rather than a sharp rally, with a more significant resurgence expected in the longer term.

Conclusion

 While the approval of the first spot Bitcoin ETF in the U.S. is a landmark event for the cryptocurrency sector, its immediate impact on Bitcoin’s price may be more subdued than many anticipate. Options data and market analysis suggest that the news has been largely priced in by investors, leading to modest expectations for near-term price movement. The scenario points to a period of relative market stability, with significant growth potentially materializing in the longer term as the crypto market continues to mature and evolve.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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