The cryptocurrency market was hit with a deep correction on Wednesday as a report suggesting the Securities and Exchange Commission (SEC) could reject multiple spot Bitcoin (BTC) ETF applications made the rounds, sparking the latest round of FUD and instigating a widespread sell-off.
Many analysts have said the reaction was overblown, especially because the SEC reportedly held meetings on Wednesday with the Nasdaq, CBOE, and NYSE exchanges to finalize comments on the 19b-4 forms submitted by the prospective BTC Spot ETF issuers.
“Things you prob don't do if you going to deny or delay,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, in response to reports of the meeting and the circulating rumor that the applications would be denied. "Hearing similar by the way... when we see updated (final) 19b-4s roll in that is a sign approval is imminent as SEC has been doing back and forth with issuers offline to perfect their 19b-4s."
Stocks also fell under pressure after the latest jobs report in the U.S. showed there were 8.79 million job openings at the end of November, the lowest reading since March 2021, and below the expected 8.82 million openings. This led many to reevaluate their expectations that the Federal Reserve would lower interest rates as soon as March, leading to declining asset prices as some traders moved to derisk.
At the market close, the S&P, Dow, and Nasdaq were in the red, down 0.80%, 0.76%, and 1.18%, respectively.
Data provided by TradingView shows that Bitcoin underwent a rapid sell-off over two hours on Wednesday morning, plunging more than 10% from $45,150 to a daily low near $40,635 before dip buyers arrived to halt the sell-off. BTC has since climbed back above support at $42,800 and currently trades at $42,840, a decline of 4.7% on the 24-hour chart.
BTC/USD Chart by TradingView
The rapid decline of BTC resulted in January Bitcoin futures prices trading “solidly down on a big corrective pullback after hitting a contract high on Tuesday,” according to Kitco senior technical analyst Jim Wyckoff.
Bitcoin futures 1-day chart. Source: Kitco
“Bulls still have the near-term technical advantage but may be getting tired now and may need to pause for a while,” Wyckoff said. “A price uptrend remains in place on the daily bar chart. Bulls still have the firm overall near-term technical advantage.”
Despite Wednesday’s price plunge, most analysts remain positive about the outlook for Bitcoin and crypto in 2024 and beyond, and think it's only a matter of time before the top crypto hits a new all-time high.
“My base-case expectation is for new all-time highs, hopefully over $100,000, so hopefully six figures,” said popular macro expert Lyn Alden. “That range is entirely reasonable.”
But Alden doesn’t think that would be the top and said a peak price of $100,000 during the current bull cycle would be somewhat of a letdown.
“I think that something like $100,000 plus would be kind of disappointing for a bull market cycle, especially after the prior bull market cycle was on the disappointing end, too,” she said. “So I’d kind of hope for $200,000 or more over the next two-plus years.”
Insight into what could push BTC to those prices was provided by John Palmer, the president of Cboe Digital, during an interview with Bloomberg TV.
“Seeing that approval is going to pave the way for pension funds and RIA-based funds to be able to invest in assets in a spot Bitcoin ETF where they may not be able to gain that access today in just a native, spot Bitcoin token,” he said.
Palmer added that institutional players would utilize both a spot BTC ETF and other Bitcoin derivative products in unison to hedge risks associated with Bitcoin investments.
While some analysts see the approval of a spot BTC ETF as a ‘sell the news’ event, long term, most remain bullish.
According to the latest report from K33 senior analyst Vetle Lunde and head of research Anders Helseth, there is a 75% chance of a ‘sell-the-news’ event occurring, as opposed to a 20% chance of the ETFs receiving approval and generating substantial inflows that could mitigate selling pressure. They also gave a small bit of credence to Wednesday’s denial rumors, saying they see a 5% chance that the ETFs might be rejected.
Double-digit gainers in a sea of red
All but two dozen tokens in the top 200 recorded losses on Wednesday, but as usual, several tokens managed to buck the trend to post double-digit gains.
Daily cryptocurrency market performance. Source: Coin360
Powerledger (POWR) was the biggest gainer, increasing 39.25% to trade at $0.51, while Chromia (CHR) climbed 25.4%, and Ethereum Name Service (ENS) gained 15.6%. Tellor (TRB) led the losers with a decline of 20.1%, followed by a loss of 18.9% for GMT (GMT), and a loss of 17.4% for Memecoin (MEME).
The overall cryptocurrency market cap now stands at $1.63 trillion, and Bitcoin’s dominance rate is 51.2%.
