The Bitcoin price
has seen substantial volatility in recent weeks, largely driven by speculation around the potential approval of a Bitcoin exchange-traded fund (ETF) by the SEC. While Bitcoin bulls have cheered each new rumor of progress on the ETF front, whether the asset can sustain significant price increases in the long run solely based on ETF speculation and hype, is still a point of debate.
Bitcoin Price Sees Short-Term Boost From ETF Speculation
Last week, Bitcoin prices rose 10% intraday on October 16 following an unconfirmed rumor that the SEC had already greenlit a spot Bitcoin ETF from BlackRock. The rumor proved false, and Bitcoin pulled back from its brief spike once traders realized no actual ETF approval had occurred yet, however.
This week, Bitcoin experienced a similar double-digit percentage price boost based on reports that the SEC is finally preparing to allow spot Bitcoin ETFs, with potential approval coming by year-end.
The emergence of this narrative has excited Bitcoin traders, helping the cryptocurrency gain over 100% in value since the beginning of 2023. Bitcoin is still far below its all-time high near $69,000 reached in November 2021, however.
BREAKING: rumors are circulating that approval of a #Bitcoin ETF is expected within 24 hours.
— BITCOINLFG® (@bitcoinlfgo) October 27, 2023
Lessons From the Bitcoin Futures ETF Launch
The key question now is how long this momentum can persist if Bitcoin ETF approval continues to stay elusive. Once the long-awaited ETF finally arrives and the initial thrill fades, the risk of diminished support and fading hype certainly exists.
Some insight can be gleaned by examining the market’s reaction to the launch of Bitcoin futures ETFs in 2021. Many traders anticipated those ETFs would greatly boost mainstream adoption. Demand was largely concentrated within the very first futures ETF, however, leaving subsequent funds struggling to attract similar interest.
This time around, major players like BlackRock, Invesco, and Fidelity are set to compete aggressively for the highly coveted first spot Bitcoin ETF title. Yet the eventual winner may find that most of the pent-up demand is exhausted early on.
Sustaining Momentum Beyond the ETF Catalyst
Adding to the uncertainty is the more cautious macro environment Bitcoin faces today compared to 2021. Rising Treasury yields, general risk-off sentiment in global markets, and negative headlines around Sam Bankman-Fried’s trial have all generated stiff headwinds for cryptocurrencies lately.
Even highly successful crypto investors like the Winklevoss twins have become entangled in messy legal battles.
In conclusion, while short-term price spikes driven by Bitcoin ETF hype seem likely to continue, whether these gains can be sustained long-term once an ETF finally launches is uncertain. As exciting as SEC approval would be for a potential price spike, over-dependence on a single narrative could leave Bitcoin investors vulnerable. Those who got in early can probably afford to enjoy the ride, but restraint may be wise for others. Ultimately, Bitcoin’s price will depend most on its real-world utility and adoption over time rather than regulatory catalysts.