The crypto rollercoaster is in full swing as Bitcoin and other altcoins face a sudden correction, causing a whopping $670 million in liquidations within just a few hours. The majority of casualties are traders who were riding the long positions when the markets decided to throw a curveball.
Bitcoin took a hit, dropping over 8% from $45,469 to $41,805 in a mere three hours, with Ethereum and fellow altcoins experiencing even sharper declines.
ETF Rejection Predictions and Market Uncertainty
While the exact trigger for this market shake-up remains elusive, it coincides with a buzzworthy report from crypto financial services firm Matrixport. The firm boldly predicts that the U.S. Securities and Exchange Commission (SEC) is gearing up to snub applications for spot Bitcoin exchange-traded funds (ETFs), defying the expectations of the majority in the market.
In their report titled “Why the SEC will REJECT Bitcoin Spot ETFs again,” Matrixport questions the logic behind expecting SEC Chair Gary Gensler, a vocal advocate for tighter crypto regulations, to give the green light to an ETF.
Cautionary Measures and Hedging Strategies
Highlighting potential signs of market frothiness and a buildup in leverage, Matrixport suggests that those bullish on the market might want to consider put options at the $40,000 strike price to hedge against a potential collapse below support.
The report unveils a staggering $14 billion injected into crypto since traders began speculating on an ETF approval in September 2023. While some of this influx could be linked to favorable macro conditions amid a dovish Federal Reserve, Matrixport estimates that a significant portion, around $10 billion, is tied to ETF approval expectations.
Matrixport warns of potential cascading liquidations if the SEC denies approval, projecting a rapid -20% decline in Bitcoin prices, potentially plummeting back to the $36,000/$38,000 range. With a looming deadline of Friday, January 5, 2024, the firm advises traders to hedge their long exposure by considering the purchase of $40,000 strike puts for the end of January or even opting for outright short positions on Bitcoin through options. As the market faces uncertainty, caution appears to be the name of the game.