The Bitcoin price has experienced significant volatility over recent weeks due to the speculation surrounding the potential approval of a Bitcoin exchange-traded fund (ETF) by the Securities and Exchange Commission (SEC). While Bitcoin enthusiasts have celebrated every rumor of progress on the ETF front, there remains a debate about whether the asset can sustain substantial price increases in the long term based solely on ETF speculation and hype.
Temporary Price Spikes and Their Consequences
Last week, Bitcoin prices surged by 10% on October 16 in response to an unconfirmed rumor that the SEC had already given the green light to a spot Bitcoin ETF from BlackRock. However, the rumor turned out to be false, and Bitcoin experienced a pullback once traders realized that no actual ETF approval had taken place yet. Similarly, this week, Bitcoin saw another double-digit percentage price boost following reports that the SEC is preparing to allow spot Bitcoin ETFs, with potential approval expected by the end of the year.
It is worth noting that the emergence of this narrative has excited Bitcoin traders, leading to a 100% increase in the cryptocurrency’s value since the beginning of 2023. However, it is important to highlight that Bitcoin is still significantly below its all-time high near $69,000 reached in November 2021.
The Sustainability of Momentum
The main concern now is how long this momentum can continue if Bitcoin ETF approval remains elusive. While eagerly anticipated, the eventual launch of an ETF may result in diminished support and fading hype once the initial excitement fades. A possible indicator can be found by examining the market’s response to the introduction of Bitcoin futures ETFs in 2021.
“Many traders believed that the introduction of those ETFs would significantly boost mainstream adoption. However, demand was concentrated primarily within the first futures ETF, leaving subsequent funds struggling to attract similar interest.”
— Anonymous Analyst
For the current scenario, major players like BlackRock, Invesco, and Fidelity are all competing for the highly sought-after first spot Bitcoin ETF title. However, the eventual winner might discover that most of the pent-up demand has already been exhausted early on.
Additionally, the current macro environment Bitcoin faces is more cautious compared to 2021. Factors such as rising Treasury yields, general risk-off sentiment in global markets, and negative headlines surrounding Sam Bankman-Fried’s trial have all created obstacles for cryptocurrencies recently. Even highly successful crypto investors like the Winklevoss twins have become entangled in legal battles, adding to the overall uncertainty.
In conclusion, while short-term price spikes driven by Bitcoin ETF hype are likely to persist, it remains uncertain whether these gains can be sustained in the long term once an ETF is launched. While SEC approval would undoubtedly cause a price spike, over-reliance on a single narrative could expose Bitcoin investors to vulnerabilities.
“Those who got in early may enjoy the ride, but exercising restraint may be wise for others. Ultimately, Bitcoin’s price will depend more on its real-world utility and adoption over time rather than regulatory catalysts.”
— Financial Analyst
