K33 Research: Spot Bitcoin ETF Approval Has 75% Sell-the-News Probability

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2023 has been a good year for altcoins, particularly Q4. However, this is only a fraction of what is possible in a full-blown bull run. Now that we have entered 2024, the probability of ETF’s frenzy has changed, and there is concern about a sell-event. Many analysts have predicted that BTC might hit a rough patch soon.

As the crypto sphere braces for a watershed moment with the potential approval of the inaugural Bitcoin spot Exchange-Traded Fund (ETF), K33 Research, a prominent analytics firm, has raised a cautious flag, suggesting an exuberant market sentiment leading up to the decision.

The Impending Decision and Market Sentiment

According to the K33 Research report, the final call on Bitcoin spot ETFs is expected to drop between January 8 and January 10, with a strong possibility of impactful news breaking even sooner. Senior Analyst Vetle Lunde underscores a notable trend within the crypto community – a prevailing debate about the potential “sell-the-news” response post-ETF approval.

Lunde’s observations point to a market filled with traders heavily invested ahead of the verdict. The derivatives market, particularly, highlights substantial premiums, hinting at pronounced enthusiasm following Bitcoin’s sustained upward trend over the past few months.

Are the probabilities of approval a signal of growth or risk?  

To gauge potential outcomes, Lunde assigns a significant 75% probability to the anticipated sell-the-news scenario while predicting a moderate 20% chance of approval and a minimal 5% likelihood of ETF denial. Despite promising signals from recent meetings and updated filings with the Securities and Exchange Commission, the market appears frothy.

The analysis points to a surging futures market on the Chicago Mercantile Exchange (CME), hitting an annualized 50%, indicating a notable increase in institutional investors’ long exposure. However, this heightened exposure raises concerns about the sustainability of maintaining exposure through CME, especially in the face of increased premiums.

Retail Investor Behavior and Impact on Altcoins?

Retail investors’ behavior, observed through offshore exchange funding rates soaring to a yearly high of 72% during Bitcoin’s recent rapid climb, hints at a reluctance among short positions with the ETF decision looming. Analysts suggest a scenario of potential long squeezes due to the aggressive leveraging by longs.

While certain altcoins like SOL, ORDI, and BONK have experienced considerable upward movements, this fervor might signal a possible market peak. However, analysts interpret this as advantageous for Bitcoin, as the excitement around altcoins could divert retail activity, potentially reducing the risk of liquidations for Bitcoin and fostering a more stable leverage environment. Since BTC trades between $40,500 and $43,500, expect volatility as the launch approaches.

Crypto market excitement is high due to the Bitcoin spot ETF decision. However, K33 Research warns of a post-approval market change and sell-off reaction, advising caution in this highly unpredictable cryptocurrency scenario.