As James Hunt reported for The Block earlier today, in a research note (published on 1 Dec 2024) titled “All-time high CME premiums ahead of ETF verdict,” K33 Research’s Senior Analyst Vetle Lunde and Head of Research Anders Helseth explore the market dynamics preceding the anticipated decision by the U.S. SEC on spot Bitcoin ETFs.
The decision, which is expected by many to be announced between January 8 and January 10, has garnered significant attention in the cryptocurrency market.
Lunde and Helseth predict that the announcement could lead to a ‘sell-the-news’ event, a scenario they believe is the most probable outcome.
The analysts observe that traders are considerably exposed ahead of the verdict, with derivatives indicating massive premiums following Bitcoin’s recent positive momentum. This situation sets the stage for a potential sell-off as short-term market participants may look to take profits.
The K33 Research analysts estimate a 75% chance of the ‘sell-the-news’ event occurring, compared to a 20% probability of the ETFs being approved and attracting significant inflows to counteract selling pressure. They also acknowledge a 5% possibility of the ETFs being denied.
The research highlights the surge in futures premiums on the Chicago Mercantile Exchange, reaching annualized levels of 50%, indicating institutional anticipation of ETF approval. Open interest in BTC has notably increased, likely driven by expectations of the ETF approvals. On the retail side, funding rates on offshore exchanges have reached extreme levels, suggesting a reluctance from short sellers to engage in the market so close to the spot ETF decision.
Despite the potential for a short-term sell-off, K33 Research anticipates that the introduction of spot ETFs, combined with the upcoming Bitcoin halving event in April, could have a favorable impact on the market as the year progresses.
One of the first crypto analysts to agree with this assessment was Josh Rager:
Gabor Gurbacs, a digital assets adviser at VanEck said on social media platform X on 32 Dec 2023 that the initial impact of spot Bitcoin ETFs might not be as significant as some expect, with the initial influx possibly being just a few hundred million dollars, a portion of which could be reinvested funds. However, he believes that the long-term effects of these ETFs are likely being underestimated. Gurbacs draws comparisons to the historical investment trends in gold to support his viewpoint.
He further notes that while immediate market developments often garner significant attention, the more profound, long-term effects of Bitcoin in shaping its capital markets and financial products might not be fully recognized in its current market valuation. Gurbacs stresses the importance of looking beyond traditional financial giants like BlackRock adopting Bitcoin and instead considering which Bitcoin company might rise to become a major player in the future, akin to BlackRock.
Eric Balchunas and James Seyffart, Bloomberg Intelligence’s leading ETF analysts, largely concur with Gurbacs’ assessment:
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