Bitcoin Slides After Report that Spot ETF May Be Denied

With many eager crypto investors confident that the U.S. Securities and Exchange Commission will approve the first spot bitcoin ETF this month, one voice against the grain may have moved bitcoin markets Wednesday upon projecting the agency would again reject the novel investment vehicle.

The crypto research firm Matrixport released a report Tuesday by Head of Research Markus Thielen that predicted the SEC will once again rule against spot bitcoin ETFs on the basis that the commissioners who vote to approve or deny new products are majority Democrats and SEC Chair Gensler has been hostile to new crypto products.

“While we have seen frequent meetings between the ETF applicants and staff from the SEC, which resulted in the applicants refiling their applications, we believe all applications fall short of a critical requirement that must be met before the SEC approves,” Thielen wrote. “This might be fulfilled by Q2 2024, but we expect the SEC to reject all proposals in January.”

Bitcoin’s price sunk 8% Wednesday morning. The Matrixport report may have contributed to the market movement given its traction on X and discourse it stirred up there.

Spot Bitcoin ETF Optimism  

Yet while Gensler has expressed his suspicion of cryptocurrency, analysts believe the agency’s hands are largely tied because of a U.S. appeals court that ruled in Grayscale’s favor in a lawsuit that alleged the regulator was wrong to block Grayscale’s trust conversion.

Bloomberg analyst Eric Balchunas wrote on X, “Not saying it’s imposs [sic] (again we [sic] still ‘only’ at 90%) but it overturns a LOT of good intel.” 

While Thielen has been among the more contrarian crypto markets analysts, he accurately predicted in early November, with BTC hovering around $36,000, that the price would hit $45,000 by year end. Bitcoin rose well above $44,000 in December before sagging in the final days. Thielen has forecast that bitcoin will hit $125,000 by the end of 2024.

Still, he report was met by some including Ric Edelman, founder of the Digital Assets Council of Financial Professionals. "It’s worth noting that Matrixport is alone in its prediction," he said in an emailed comment.

"Based on the conversations I’ve been having with many of the ETF sponsors, I’ve heard nothing to suggest that anyone believes the SEC will reject all of the applications," he wrote. 

Contact Lucy Brewster at [email protected].