The cryptocurrency community is waiting eagerly for the SEC’s approval of several spot Bitcoin exchange-traded fund (ETF) applications. However, crypto financial services company Matrixport is skeptical of the ETF approval.
The research firm acknowledged that the ETF applicants and SEC staff collaborated during the leading applications process. Despite these collaborations, Matrixport believes that these applications do not meet the SEC’s approval criteria.
Matrixport believes that disapproval will likely trigger a risk of “cascading liquidations”. Specifically, the firm suggested that the $5.1 billion in perpetual long Bitcoin futures will be significantly affected.
Matrixport suggests that Gensler and the predominantly Democratic group of voting Commissioners might hesitate to endorse Bitcoin as a store of value. The report emphasizes a connection between the additional $14 billion in fiat and leverage invested in crypto since September and the anticipation of spot Bitcoin ETF approval.
The firm estimates that approximately $10 billion could be associated with this expectation.
Stefan Rust, the Truflation’s CEO, echoes Matrixport’s forecast. He doubts the government will greenlight a spot Bitcoin ETF, especially with concurrent multiple applications pending. Rust asserts that the government is still wrestling with regulating digital assets, particularly cryptocurrencies.
Matrixport advised traders to hedge long positions by going short on Bitcoin through options. This will mitigate the potential loss of their Bitcoin wealth if the approvals are withheld.
Although the Bitcoin ETF approval is highly unlikely, Matrixport believes that Bitcoin will be trading over the $42,000 mark by the end of the year. The firm added that several bullish factors, such as the US election, increased Bitcoin mining, and the 2023 halving event.