Bitcoin Spot ETF Approval is Almost Certain in January 2024 —3 Key Indicators

Key Insights:

• On Jan 3, Bitcoin (BTC) price unexpectedly plummeted 10% amid widespread speculation about the SEC potentially rejecting BTC Spot ETF applications.
• Bitcoin ETF applicants have increased their BTC holdings by $17.5 million (397 BTC) since the dismissal speculations broke out. 
• Bitcoin Dominance (BTC.D) has rebounded 5% from the 200-day SMA, signaling that crypto investors are increasingly leaning into BTC. 

On Wednesday, January 3, the price of Bitcoin (BTC) unexpectedly plunged by 10%, reaching a 20-day low of $40,870 amid widespread speculation about the US Securities and Exchange Commission (SEC) potentially rejecting BTC Spot Exchange Traded Fund (ETF) applications.

Within a frenetic 12 hours of panic trading, over $165 million worth of LONG liquidations sent the price of Bitcoin spiraling 10% to a 20-day low of $40,870. Furthermore, the entire global crypto market lost over $109 billion in market capitalization.

While the price of Bitcoin has since rebounded by 8% to reclaim $44,000 at the time of writing on January 7, the media discourse surrounding the SEC’s verdict on Bitcoin Spot ETF hangs in the balance.

However, following the money, these 3 (three) on-chain metrics and market sentiment indices suggest that crypto investors are leaning overwhelmingly towards a positive Spot ETF verdict from the SEC.

1. Market Sentiment Swings Positive as “Insiders” Debunk Spot ETF Dismissal Rumors

A speculative research report from the digital asset management firm Matrixport sent the crypto market into panic mode on January 3. The research note had suggested that the SEC was leaning towards dismissing the current Spot Bitcoin ETF applications.

Citing insider tips from the Bitcoin Spot ETF applicants, many market analysts rose to debunk Matrixport’s bearish research note. Notably, Bloomberg Senior ETF Analyst Eric Balchunas reiterated January 11th as a tentative approval date.

Yeah, it’s basically done. Latest I’m hearing is that final S-1s are due at 8 am on Monday as the SEC is trying to line everyone up for the January 11th launch. That said, I still want to hear it from the SEC to call it official.”

– Eric Balchunas, Bloomberg Senior ETF Analyst (via Twitter/X, January 5, 2024).

Interestingly, a vital Bitcoin Sentiment index has revealed that investors have responded positively to the overwhelming approval signals from insiders and credible market analysts.

The BTC Weighted Sentiment Index, a vital social metric computed by Santiment, a blockchain data analytics platform, monitors data from relevant social media channels, assessing the balance between positive and negative comments about an asset.

Essentially, the Sentiment index swings into positive values when the number of optimistic comments outnumber the negative ones.

Bitcoin weighted-sentiment stood at -0.91 on Dec 31. But following re-assuring comments about the SEC verdict from “insiders” and bullish market analysts, it swung into positive values, trending as high as 2.22  on Jan 4. 

When the number of positive statements exceeds negatives, the Weighted Sentiment index increases into positive values and vice-versa.

With the Spot Bitcoin ETF verdict dominating discussions surrounding the pioneer cryptocurrency, this overwhelming optimism is a vivid indication that most market participants are confident of an imminent approval.

2. Bitcoin ETF Applicants Add $17.5 Million to Holdings Amid “Rejection” Rumors

Secondly, in further confirmation of the dominant positive sentiment, Bitcoin ETF applicants were spotted adding millions of dollars worth of BTC to their holdings amid the SEC rejection rumors.

As the rumors swirled, Bitcoin price plummeted by 10% on Wednesday, January 3. But interestingly, on-chain data trail reveals that companies filing to offer Bitcoin-based spot Exchange Traded Funds (ETF) capitalized on the price dip to acquire more BTC to beef up their capital base.

The fund sponsors held a total of 703,016 BTC in their cumulative holdings at the close of January 2. But as the rumor broke out, rather than sell off their BTC holdings, the fund sponsors entered a buying spree. At press time on January 7, they have now increased their holdings to 703,313 BTC.

Notably, this shows that the fund sponsors have acquired a total of 397 BTC, worth approximately $17.5 million, since the SEC rejection rumors broke out.

Cryptoquant’s Fund Holdings metric tracks the total supply of BTC coins held by a select number of digital assets investment firms such as trusts and ETF applicants.

Intuitively, a potential dismissal of the Spot ETF applications could have triggered a sell-signal among fund sponsors. But instead, the on-chain data trails show quite the opposite. As depicted in the chart above, fund sponsors took advantage of the Bitcoin price dip on Wednesday to shore up their capital base.

In essence, this conspicuous increase in Fund Holdings is another on-chain indicator that validates the bullish outlook that an approval verdict is imminent.

3. Crypto Investors are Currently Re-Allocating Funds from Altcoins to BTC

Thirdly, crypto investors have been disproportionately channeling funds towards BTC as the purported verdict date for the Spot BTC ETF decision draws nearer. A clear indication of this is the unusual increase in Bitcoin Dominance (BTC.D) since the turn of the year.

As depicted in the chart below, Bitcoin had begun to lose traction in mid-December as the altcoin season swung into full speed. Between December 6 and December 29, Bitcoin Dominance (BTC.D) dropped from 55.26% to 51.10%.

However, as whisperings of the ETF verdict grew louder, crypto investors began to channel capital towards BTC again, potentially to scoop gains from the widely-anticipated positive outcome.

Evidently, BTC.D has rebounded from the 200-day SMA, increasing from 51% to 54% between December 29 and January 7.