Bitcoin experienced a significant drop in price, falling below $26,000, following news that the US Securities and Exchange Commission (SEC) would be delaying the decision on several filings for a US spot Bitcoin ETF until October. The SEC cited insufficient time to evaluate the applications as the reason for the delay.
Impact on the Market
The market reacted strongly to the SEC’s decision, causing Bitcoin to decline for the second time in two weeks. Despite a recent rally sparked by a drop in US bond yields and a small win for Grayscale against the SEC, the Bitcoin ETF delay has once again put investors on the defensive.
Total long liquidations during this price downturn amounted to over $100 million, with the majority occurring over a 12-hour period on OKX and Binance exchanges. Although this drop was not as severe as the mid-August rout, where over $855 million was wiped in a single day, it still had a significant impact on the market.
The Role of the SEC
Mark Connors, 3IQ’s head of research, believes that the negative sentiment surrounding Bitcoin is a result of the SEC’s cautious approach. He emphasizes that the market is looking for finality regarding the approval of a US spot Bitcoin ETF, rather than changes in opinion or failed expectations. The SEC’s delay has caused uncertainty and a lack of clarity in the market.
Positive Factors on the Horizon
Despite the recent setback, there are positive factors that may contribute to a resurgence in Bitcoin’s price. Connors point to the asset’s ability to deliver outsized gains compared to potential losses, known as “positive skew”. Additionally, with a halving event just a few months away, Bitcoin’s energy efficiency and rising fees are generating positive sentiment. These factors, along with Bitcoin’s ability to withstand market volatility, suggest that the current price action may be temporary.
The Importance of Bitcoin ETF Approval
The approval of a US spot Bitcoin ETF has the potential to be a game changer for the industry. While the market reacts positively to news of an approved ETF, it also opens up a significant amount of liquidity for investors to exit their positions. This liquidity, which would otherwise be locked up in products like Grayscale’s GBTC, can cause fluctuations in the market.
The Road Ahead
As the market awaits the SEC’s decision on the Bitcoin ETF filings, investors are advised to remain cautious. The delay has created a sense of uncertainty, requiring more patience from those looking for a breakthrough in the industry. However, the positive factors, such as the upcoming halving event and Bitcoin’s resilience, provide reasons for optimism. It remains to be seen how the market will react once the SEC makes its final decision in October.
