The cryptocurrency market is “dramatically underestimating” the potential impact of a spot Bitcoin exchange-traded fund (ETF) approval. According to analysts from crypto research firm K33, previously known as Arcane Research, a Bitcoin liquidation has occurred. It means that the chart has shown the forced closing of a trading position.
Rising Chances of Approval
In a recent market report, K33’s senior analyst, Vetle Lunde, emphasized that the crypto market has not fully priced in the positive sentiment. The prospects of a spot Bitcoin ETF have not shown any significant support. However, the last three months have significantly increased the likelihood of approval. This optimism hasn’t been reflected in Bitcoin’s price or that of other major cryptocurrencies.
Enormous Inflows Expected
The analysts explained that Bitcoin initially lost some gains following Grayscale’s legal victory over the Securities and Exchange Commission (SEC). Therefore, approval of a spot ETF would likely “attract enormous inflows” and substantially increase buying pressure for free Bitcoin. They also highlighted that the downside of a potential ETF rejection would be “negligible,” with Bitcoin prices likely continuing business as usual.
Market’s Incorrect Outlook
Lunde and Helseth contended that the prevailing market sentiment regarding ETFs is fundamentally flawed, especially in light of the fact that numerous Bloomberg analysts currently forecast a 75% likelihood of approval within the year. To support their bullish prediction, they pointed to the recent 2% gain in the Nasdaq-100 index, often seen as an indicator of broader market risk appetite.
Optimism for Ethereum (ETH)
In addition to their positive stance on Bitcoin, the analysts expressed optimism about Ethereum (ETH) outperforming Bitcoin in the next two months. They attributed this expectation to strong momentum ahead of a futures-based ETF listing for ETH. Making a comparison to the Bitcoin liquidation that occurred before the debut of the inaugural Bitcoin futures-based ETF in 2021, they proposed that Ether might undergo comparable price movements.
Verdict on Ethereum ETF
The announcement of the verdict on a futures-based Ethereum ETF will appear in mid-October. Besides, it may receive approval from the SEC. This positive sentiment surrounding Bitcoin and Ethereum highlights the market’s evolving dynamics and response to potential regulatory developments.
Bitcoin Recovery: Mixed Possibilities
Bitcoin’s current price landscape offers a mix of possibilities. The asset hovering around $25,737 (Bitcoin to GBP – £20,601), generating uncertainty in the short term. However, a more favourable risk-to-reward ratio is seen in the midterm outlook, especially if free Bitcoin can stabilize within the $25.8K to $26.8K range.
Looming Downside Risk
Despite this optimism, there is a looming downside risk. There is a potential for price levels to drop to the range of $23.8K to $24.8K. Investors are advised to monitor this bearish trend closely, as it could trigger further declines.
Bitcoin Bull Run: Signs Amid Bearish Sentiment
Notably, there are some encouraging signs amid the bearish sentiment. The Relative Strength Index (RSI) suggests a bullish divergence, and market volatility appears to be decreasing. These indicators often signal a potential bottoming-out phase, setting the stage for a potential upward swing.
Key Price Levels to Watch Before Bitcoin Recovery
The key to watch is the $26.8K price level. If Bitcoin can maintain this point, it might break the downward trend and create the conditions for a bullish phase. Investors are advised to consider entering the market after a dip, or once Bitcoin establishes a firm hold at the $26.8K level.
Analyst Insights and Investor Recommendations
In conclusion, market analysts see promise in Bitcoin’s midterm outlook, offering a favourable risk-to-reward ratio. However, the short-term remains uncertain. The recommendation is to consider buying after the Bitcoin liquidation consolidates at the $26.8K level, as this could signal the beginning of a new bullish phase. While there are bearish trends and potential downside risks, there are also signs of a turnaround. Investors should exercise caution, closely monitoring key indicators and price levels. A successful breach of the $26.8K barrier could indicate the start of a new bullish phase, providing a more secure investment opportunity.
