When the United States approves the first spot exchange-traded fund (ETF), Bitcoin (BTC) price action may become volatile, according to Joshua Lim, head of derivatives at capital market firm Genesis Trading.
Lim discussed his prediction on X (formerly Twitter) on Nov. 28, suggesting that BTC could suffer in the beginning of 2024.
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Bitcoin ETF approval: Retail may be left holding the buck
Lim pointed out that traditional finance, or “TradFi,” is hoping to make a profit from the potential approval of a spot ETF.
“It is evident that traders from the traditional finance sector have been long crypto for some time now and they are currently paying a premium to maintain their positions,” the thread stated, along with data related to open interest on CME Group’s Bitcoin futures.
The success of the first Bitcoin futures ETF (BITO) and stocks of crypto firms such as U.S. exchange Coinbase (COIN) – which has increased by 250% year-to-date – have generated a lot of interest and encouraged institutional adoption of Bitcoin.
However, Lim and others have suggested that the market could quickly cool off once the spot ETF is approved, which would be a typical “buy the rumor, sell the news” event.
“What does it all mean?” he asked.
A gold ETF rerun?
Lim’s worries that lay investors may be at a disadvantage when ETF approval day comes around are shared by many.
James Straten, a research and data analyst at crypto insights firm CryptoSlate, looked to history to back up these concerns. “When the Gold ETF (GLD) was introduced in November 2004, it opened around $45 and dropped to approximately $41 by May 2005,” he said in a Nov. 28 CryptoSlate analysis. “However, over the next seven years it saw an impressive 268% increase.”
On a more positive note, popular trader Jelle pointed out that the week’s news stories, including the $4.3-billion settlement between the U.S. government and Binance, had not dampened institutional interest. He noted that CME futures still trade at a premium over the Bitcoin spot price.
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