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The launch of Bitcoin ETFs creates further price volatility and division in opinions as eyes turn to the funds' first day of trading

Today's Cryptocurrency analysis on behalf of Samer Hasn Market Analyst and part of the Research Team at XS.com

January 11, 2024 (Investorideas.com Newswire) Cryptocurrency market had a very volatile night. Bitcoin fluctuated between the levels of $44,800 and $47,730. Ethereum was also able to advance and record more record levels that we have not seen since May of 2022, reaching the level of $2644.

The movements in the cryptocurrency market came with the historic event of the Securities and Exchange Commission’s approval of the launch of a number of spot Bitcoin ETFs.

While Bitcoin's decline shortly after the news was announced came as part of what could be "buying the rumor and selling the news." The markets have been pricing in this news since approximately last October, when Bitcoin was near the $25,000 level.

In details, the SEC approved the launch of 11 spot Bitcoin ETFs, which were submitted by many giant asset managers months ago, in addition to approving the conversion of the Grayscale Bitcoin Trust (GBTC) into a spot ETF after a long struggle in the corridors of the courts. Today, US exchanges are expected to welcome most of the new funds on the first day of trading.

While this news led to more conflict between buyers and sellers, which ultimately led to the continuation of the relatively large liquidations of open positions in cryptocurrencies.

During the past 24 hours, about $280 million in open positions were liquidated, divided between both long and short positions, according to data provided by CoinGlass. Naturally, Bitcoin accounted for the bulk of these liquidations with about $87 million of the liquidated long positions accounting for a share of $53 million.

Meanwhile, with this historic event, this step witnessed widespread welcome, in addition to more criticism, even from the decision makers themselves.

Grayscale Investments CEO, Michael Sonnenshein, believes that Bitcoin will be able to change the world and expressed his happiness at providing access to it through a licensed vehicle in the US.

Ripple Labs CEO Brad Garlinghouse also believes the move could open the way for more adoption from institutional investors as the focus on Bitcoin shifts from a speculative asset to a cryptocurrency with real-world use.

In contrast, Bitcoin continued to receive more criticism from its traditional opponents. The chairman of the SEC, Gary Gensler, who himself voted to approve the launch of these ETFs, issued a statement warning of the dangers of Bitcoin. He also said that, unlike the metal ETFs that are used in the real world, Bitcoin is a speculative and volatile asset and is used for illicit activities.

Also, a member of the Commission, Caroline Crenshaw, who voted against the approval decision, expressed her concerns about the flood of these products into retirement accounts, which may not bear the burden of the losses that may befall them as a result of fraud and manipulation that affect the market without adequate oversight.

One of the most prominent critics of cryptocurrencies, the CEO of the banking group JPMorgan Chase, also continued his criticism after the decision was announced and reiterated that Bitcoin does not carry any value and that its actual use is in illegal activities.

The famous trader, habitual gold advocate and opponent of cryptocurrencies, Peter Schiff, said that these EFTs are just one of many new ways to gamble on Bitcoin. He also added that buyers now have nothing to bet on.

Today and in the coming days, they will tell us about the aspirations of the market in all its categories, whether individuals or institutional investors, for the future of Bitcoin by monitoring the performance of the ETFs in their first sessions. This is because these funds will provide the opportunity for all categories of investors alike to invest in Bitcoin.

The broad investor base in this market may reduce the impact of speculation and sudden movements in the market to some extent and shift the focus more on market fundamentals on the one hand. On the other hand, it may deepen transparency with many mandatory disclosures that asset managers will provide regarding funds.

Market fundamentals are not necessarily sound with this historical event that reflects widespread adoption by many of the market's major institutional players.

On the positive side, the focus in the coming months is shifting to the Bitcoin halving event which is expected to happen sometime in the second quarter of this year and which is usually a positive sign for the market. We will also monitor whether cryptocurrency technology will be more widely adopted for real-world uses.

On the other hand, a largely unclear regulatory and legislative environment remains the most important obstacle to the widespread adoption of crypto technology. Perhaps this approval reflects some flexibility in the SEC’s approach to a not-so-great extent.

Cryptocurrencies still receive widespread opposition from decision-makers, as we have seen, and there are still many outstanding issues, whether on the enforcement and interpretation of the law or on the legislative side directly regulating this market.

In addition, the performance of cryptocurrencies and Bitcoin ETFs may remain dependent on the overall market sentiment to some extent. We continue to see mixed performance in the stock market in recent weeks, with fears that interest rates will remain high for a longer period than expected, which may hinder growth and the flows of investor funds into the market in its various categories.

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