On a high note, the crypto market starts in 2024, with BTC’s price rising steadily from $41,000 to around $46,000 as the Bitcoin ETF decision looms. The upcoming decisions by the U.S. Securities and Exchange Commission (SEC) on the BTC spot Exchange Traded Funds (ETFs) could lead to significant market fluctuations.
These decisions, expected between January 5th and 10th, have kept Bitcoin (BTC) and Ethereum (ETH), along with altcoins, on a tightrope with high funding rates indicating a preference for leveraged trades.
BTC’s price trends to the upside on the daily chart. Source:
Crypto Market Braces For Bitcoin ETF Decision: Volatility Spikes The New Normal?
According to a from options platform Deribit, the current market environment is hard to read with the usual indicators. Still, the readings across funding rates hint at a potential decline.
The anticipation of a price drop following the ETF announcement, a classic ‘buy the rumor, sell the news’ scenario, is in full swing. Nevertheless, the report claims the continued rise in crypto and sustained interest in trading BTC futures via the Chicago Mercantile Exchange (CME) highlights a growing enthusiasm for cryptocurrencies from traditional finance institutions.
History suggests that the crypto market often reacts more negatively to actual product launches than preliminary approvals. This was evident in events like the BTC CME futures launch and the Coinbase IPO. If the market prices are high during the launch of these new financial products, it might trigger a short-term sell-off, especially if they fail to meet flow expectations, Deribit stated.
However, any major price corrections should be “brief,” given the favorable macro environment, technical factors, and the build-up to Bitcoin’s halving. In case of decline, traders should watch the $40,000, $37,000, and $31,800 levels as potential support.
BTC’s price key levels to watch as the Bitcoin ETF decision approaches. Source: Deribit
The volatility in Bitcoin and Ethereum has been noteworthy in the run-up to these ETF approvals, with Bitcoin’s implied volatility rising sharply to around 70, outperforming Ethereum. The current volatility levels are likely to decline following the Bitcoin ETF decision.
On the BTC volatility, the report stated the following forecasting a trend for the upcoming bull market:
Ethereum, while similar to Bitcoin, hasn’t yet reached inversion. That said, its long-term volatility is outperforming Bitcoin’s, suggesting optimism for Ethereum in 2024.
In that sense, traders should look for any downside momentum in the ETH/BTC trading pair. Deribit claims that any decrease in the price of ETH is a “buy opportunity,” as suggested by the current market structure.
Impact On Bitcoin Derivatives
The options market’s reaction to the upcoming ETF decision is subtle, with Bitcoin’s call skew recovering quickly after recent market fluctuations. Ethereum maintains a consistent call premium, indicating a marked shift in focus towards Ethereum following Bitcoin ETF approvals.
As for option flows and dealer gamma positioning, Bitcoin’s option volumes have decreased, with the market favoring buying in call spreads and selling in put spreads. In other words, derivatives player have been increasing their call positions in anticipation of the ETF decision in the US.
Regarding the impact of this decision, Deribit and others have provided their views, but one analyst believes that the long-term effect of a Bitcoin spot ETF can’t be measured at the moment. Via the social media platform X, this analyst :
It’s impossible for something to be “priced in” if a huge amount of capital literally doesn’t have access yet. Yes, currently eligible speculators and their available capital can buy ahead of an event. But that’s as far as any “pricing in” goes if the pool of participants is about to greatly expand. Note: this does not predict what will happen immediately after ETF approval.
A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.
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