Crypto Week: Beware of the Spot Bitcoin-ETF Euphoria

Bitcoin prices went stratospheric this week with a surge by 19.2% on Monday and Tuesday to $35,470 per coin. This is the highest level since May 2022. The overall; gain for the major cryptocurrency during the last 10 days is 30%. This rally is primarily inspired by multiple signal of the first BlackRock spot Bitcoin-ETF sooner-than-expected approval by the U.S. Securities and Exchange Commission (SEC).

The first burst of Bitcoin prices happened on October 16, when Cointelegraph first reported about the approval in its X platform account, but deleted the message after conducting a fact checking. So, this was fake news. But it seen not quite a fake now. Later it was found out that BlackRock has already listed its spot Bitcoin-ETF in Depositary Trust & Clearing Corp with a ticker $IBTC in August. BlackRock also revamped its registration claim to the SEC indicating that it is ready to launch spot Bitcoin-ETF in October 2023 despite the initial approval expectation in the second half of January 2024. All these evidence could mean a change of SEC position towards new crypto products. So, a possibility of the spot Bitcoin-ETF sooner-than-expected approval by the watchdog is high likely. With this in mind, the crypto rally continues. The 9% upside last week was extended to 30% this week. Bitcoin Funds have received $57 million this Monday. It is about 10% of their total deposits. Crypto investors, who bet on the crypto market decline have received $400 million losses. Many of them now believe in a Bitcoin rally to $75,000 per coin. Crypto enthusiasts believe that Bitcoin may surge to $45,000 per coin. But mostly important is that the approval of the spot Bitcoin-ETF may be already fully priced in. Technically, Bitcoin prices may edge higher to the resistance at $36,000-38,000 per coin. But, they may not have enough strength to move above this resistance. They need more positive news to build up further upside momentum. If a lot of money would flow into the spot Bitcoin-ETF it may push Bitcoin prices further up. But it may be a wishful thinking amid possible overall stock market drop on recession fears. What if Treasuries yields would continue to rally, while all risky assets’ prices would drop? Would investors put their money in a very risky crypto market then? The answer is – likely no. Crypto assets are usually the first to suffer in times of turmoil am panic. 

The CEO of JP Morgan Jamie Dimon has said 'central banks were 100% dead wrong' in their financial forecasts 18 months ago and that there should be less complacency in the coming year. “I would be quite cautious about what might happen next year,” he said.

So, if we would see a recessional market decline ahead than this Bitcoin rally could be a classic “Pump and Dump” case. The drop in crypto assets’ prices would be only in favor of large investors, as they will receive most attractive prices to enter the market. Private investors that joined the rally at $34,000-38,000 per Bitcoin would have a ‘bonus’ opportunity to sell their crypto assets to large investors with a 50% discount in the end of 2023 or in the beginning of 2024.