Daily News | Bitcoin Plummeted by Nearly 10%; The SEC May Issue An ETF Approval Notice as Early as Friday; the US Government Currently Holds at Least $8.3 Billion in Bitcoin

Crypto Daily Digest: Bitcoin suddenly plummeted by nearly 10%, the SEC may issue an ETF approval notice as early as Friday

Last night, Bitcoin suddenly plummeted, erasing all gains so far this year and going against the long-term trend. It fell by 9.2% at one point, below $41,000 per coin.

On the day before this, Bitcoin had broken the $45,000 per coin mark, reaching a new high in 21 months. The volatility also affected stocks related to cryptocurrencies, with the Coinbase crypto exchange’s stock price falling 6.7% before trading. “As the market begins to measure the risk of all asset classes, we may see some volatility intensification in the short term as we enter a year with many question marks,” said Fadi Aboualfa, head of research at Copper Technologies, a cryptocurrency custodian, on Wednesday. “Anyway, we saw the market also decline in early December last year, but then rebound further.”

Bitcoin has just finished falling here, and Vitalik Buterin tweeted and called for ENS. On January 3rd, Ethereum co-founder Vitalik Buterin posted on social media stating that all Layer 2 should run on (untrusted, Merkel-based) CCIP parsers so that we can directly register, update, and read ENS domain names on Layer 2. ENS is very important.

According to Gate.io market data, ENS began to rise after Vitalik posted, with a maximum increase of 46.7% within 15 minutes and a 24-hour increase of 27.04%. The current price is $12.9.

Recently, the market has been focusing on the dynamics of ETFs. Fox journalist Eleanor Terrett posted on X platform stating that the SEC is holding meetings with major exchanges (NASDAQ, CBOE, New York Stock Exchange) to confirm the final review of the 19b-4 forms submitted by issuers of Bitcoin spot ETFs.

According to Fox Business News, lawyers from the trading and marketing department of the Securities and Exchange Commission (SEC) met with officials from major exchanges such as the New York Stock Exchange, Nasdaq, and Chicago Options Exchange on Wednesday, where Bitcoin spot ETFs will trade. According to anonymous company insiders, these meetings are seen as a positive sign that the SEC is about to approve some or all of the Bitcoin spot ETF applications from major fund management and crypto companies.

The SEC requires the exchange to revise and finalize documents 19b-4. These documents are submitted by the exchange on behalf of the ETF issuer and must be approved by the SEC before the ETF can be sold to the public. Although the final decision has not yet been made, insiders have indicated that the SEC may begin issuing approval notices to issuers on Friday, with trading starting as early as next week. ETF analysts and issuers still believe that the SEC will make a favorable decision on or before January 10th.

According to Polymarket data, the platform contract price for “SEC to pass Bitcoin ETF before January 15th” is 0.89 cents, which means that traders believe the probability of passing is 89%, compared to 50% last month.

Bloomberg ETF analyst Eric Balchunas stated that although he and ETF analyst James Seyfart still believe that the likelihood of Bitcoin spot ETFs being approved before January 10th is 90%, they have not raised this possibility beyond that number.

Although the possibility is small, the rejection of spot Bitcoin ETFs this month is likely due to the SEC’s desire for “more time” rather than direct rejection. Because the time and effort invested by the SEC and Bitcoin ETF issuers means that Bitcoin ETFs are unlikely to be completely rejected at the last minute. If the SEC refuses, fund issuers may follow in Grayscale’s footsteps and file separate lawsuits against regulatory authorities.

According to a report released by Matrixport, it is believed that all current Bitcoin ETF applications have not met a critical requirement, and therefore it is expected that the SEC will reject all proposals in January, which may be achieved in the second quarter of 2024. Since traders began betting on ETFs being approved in September 2023, at least $14 billion in additional fiat currency and leverage have been deployed in the cryptocurrency sector.

Some of these fund flows may be related to the relaxation of the macro environment, as the Federal Reserve has shifted towards a dovish approach. However, out of this additional long position of $14 billion, $10 billion may be related to the expected approval of ETFs. If the SEC refuses to approve ETFs, the market will experience large-scale liquidation, with most of the $5.1 billion long positions expected to be liquidated. Bitcoin prices may rapidly decline by 20% and fall back to the range of $36000/$38000. Nevertheless, Matrix on Target expects Bitcoin prices to remain higher than the $42000 at the beginning of the year by the end of 2024, even in the event of the SEC vetoing ETFs.

Adam, a macro researcher at Greeks.live, posted on the X platform, stating: “As time goes on, the likelihood of ETFs passing this week has become increasingly low, and the market has become deadlocked. The weakness of crypto mining stocks and the sell-off of multiple crypto-related US stocks have also strengthened market doubts. When the average option IV for the week plummeted to 52%, the average option IV expiring on January 12th also dropped to below 65%, and the overall level has fallen back to the year-end average. Presently, put options are relatively cheap in the current month, and there has been an active buying of put options in bulk trading. Options market data shows that institutional investors are not very optimistic about the ETF market.”

In addition, due to the recent rebound in Bitcoin prices, the US government currently holds at least $8.3 billion in Bitcoin, which was worth only $5 billion less than three months ago. Between November 2020 and 2022, US authorities seized a total of 207189 Bitcoins in three separate actions related to the dark web market Silk Road, Silk Road hacker Jimmy Zhong, and crypto exchange Bitfinex hackers.

Over the past decade, the price of Bitcoin has risen 70 times. If the US government chooses to hold all seized Bitcoin instead of selling it, it will still hold about 400,000 Bitcoins ($17.4 billion), almost twice the current holding value.

Today’s Main Token Trends

BTC

The overall market experienced a sharp sell-off last night and briefly tested the $40,750 support level, clearing out high-leverage positions. The pullback is expected to be driven by volume over time. Although breaking below the midpoint orange line in the short term signals a bearish trend, the fact that it still closed above the 99MA quarterly line suggests a healthy pullback and clearing scenario. A minor rebound is anticipated today, with the mid-term structure still pointing towards a potential second bottom and the lower end of the ascending channel. The long-term perspective remains bullish.

ETH

Following the significant market sell-off last night, ETH briefly dropped below the key support of $2,135. Today, the resistance is expected around the $2,260 level. A short-term upward movement followed by another pullback is likely. The mid-term structure is anticipated to continue oscillating between $2,135 and $2,381. Short-term strategies may involve waiting for a breakout to initiate long or short positions. The long-term outlook remains bullish.

INJ

After forming a head-and-shoulders pattern on the daily chart, a significant pullback occurred, precisely reaching the 0.382 Fibonacci retracement level at $29.126. Short-term focus is on whether the neckline at $34.65 holds, while the mid-to-long-term outlook remains positive, targeting $61.084, $97.616, and $117.48. The trend is considered a mid-term bull market with a short-term retracement, suggesting a long-term hold.

Macro: Interest rates are at their peak, the Policy Path Chart shows that there may be three interest rate cuts in 2024

On Wednesday, the US dollar index rose for the fourth consecutive trading day, ultimately closing 0.227% higher at 102.47, reaching a new high in nearly three weeks. The yield of US Treasury bonds fluctuated, with the 10-year yield rising above 4% for the first time since December 14th during trading. It then gave up all its gains during the day and ultimately closed at 3.92%; The two-year US Treasury yield, which is more sensitive to the Federal Reserve’s policy interest rates, closed at 4.333%.

As market expectations for the Federal Reserve’s interest rate cut were not strengthened, spot gold fell for four consecutive days, approaching the 2030 level during trading and ultimately closing down 0.84% at $2041.17 per ounce. Spot silver fell as much as 3% during the day and ultimately closed down 2.69% at $22.99 per ounce.

Due to the complete shutdown of Libyan oil fields, concerns about global oil supply shortages have intensified, and international crude oil has risen for the first time in five days, breaking away from a two-week low. WTI crude oil rose 3.64% to close at $72.97 per barrel; Brent crude oil rose 3.2% to $78.61 per barrel. The three major stock indexes collectively closed lower, with the Dow Jones Index falling 0.75%, the S&P 500 Index falling 0.8%, and the Nasdaq falling 1.18%.

The minutes of the December monetary policy meeting released by the Federal Reserve show that Federal Reserve officials believe that interest rates may be at the peak of this round of monetary policy tightening cycle, but the actual policy path will depend on the development of the US economy in the coming months.

The meeting minutes show that almost all officials predict that, given the recent downward trend in inflation, the federal funds rate will decrease by the end of 2024. But at least a few members pointed out that there is currently an “unusual high degree of uncertainty” and the possibility of further interest rate hikes has not been completely ruled out.

The meeting minutes did not provide specific instructions regarding the predicted timing of interest rate cuts in 2024. Several members pointed out that the situation may develop to the point where the target range for the federal funds rate needs to be maintained at the current 5.25% - 5.50% for a longer period of time, even longer than they currently anticipate.

Some members of the Federal Open Market Committee believe that economic data shows that the 11 rate hikes implemented by the Federal Reserve since March 2022 are having the expected effect of slowing consumer demand and cooling the labor market, and will help inflation return to the Federal Reserve’s 2% target over time.

Federal Reserve officials unanimously agreed at last December’s meeting that the interest rate hike cycle that began in 2022 may have ended. It is widely believed within the Federal Reserve that inflation has slowed down, especially at the six-month annualized inflation rate, and there are signs that the supply chain is returning to normal, and as more people join the labor market, the labor market is beginning to relax.

Federal Reserve officials have stated that raising interest rates above 5% has suppressed consumer demand, thereby easing inflation. They did not discuss when to start lowering interest rates. The Policy Path Chart shows that the bank plans to cut interest rates three times in 2024.