SEC to Reject ETF Applications in January, All Pended Till Q2 2024: Matrixport Analysis

Matrixport’s recent analysis highlights the expected rejection of spot Bitcoin exchange-traded fund (ETF) applications by the U.S. Securities and Exchange Commission (SEC). 

The central premise revolves around the political landscape, notably the SEC’s leadership being predominantly Democratic. The firm asserts that SEC Chair Gensler’s cautious approach to the crypto industry casts doubt on the approval of Bitcoin Spot ETFs.

“SEC Chair Gensler is not embracing crypto in the U.S., and it might even be a very long shot to expect that he would vote to approve bitcoin spot ETFs.”

– Matrixport

This political context intertwines with concerns that legitimizing Bitcoin as an alternative store of value could face resistance within the SEC. The Democratic majority, coupled with Gensler’s reservations, forms a formidable barrier to the swift approval of spot Bitcoin ETFs.

Delayed Approval Outlook and Market Impact

Despite ongoing discussions and meetings between ETF applicants and SEC staff, Matrixport points out a crucial unmet requirement, leading to a projected rejection in January. 

The firm anticipates a final approval timeline extending to the second quarter of 2024. The market ramifications of such a rejection are substantial, with an estimated $14 billion in crypto influenced by ETF approval expectations.

“If there is any denial by the SEC, we could see cascading liquidations as we expect most of the $5.1 billion in additional perpetual long Bitcoin futures to be unwound.”

– Matrixport.

This shows the potential for rapid and significant market corrections in the event of an SEC denial. 

The anticipated -20% decline in Bitcoin prices could bring them back to the $36,000/$38,000 range, reflecting the market’s sensitivity to regulatory decisions.

Market Response and Future Projections

Matrixport’s analysis aligns with recent market dynamics, where Bitcoin’s price surged above $45,000, fueled by investor anticipation of potential SEC approval. 

The report coincides with the SEC’s upcoming decision deadline on January 10, heightening expectations for a historic approval. However, Matrixport’s cautious outlook prompts a reconsideration of short-term market optimism.

“In my view, people tend to overestimate the initial impact of U.S. Bitcoin ETFs. Long term, people tend to underestimate the impact of spot Bitcoin ETFs.”

– Gabor Gurbacks, Adviser at VanEck.

This is a broader perspective from Gabor Gurbacks, suggesting that while the initial market response might be moderate, the long-term impact of spot Bitcoin ETFs could be substantial. 

Matrixport echoes this sentiment, expecting trillions of dollars in inflows over the next few years, even if the early days post-approval might be considered a “letdown” by wider market standards.

The Matrixport analysis reveals the intricate interplay of political dynamics, regulatory caution, and market expectations shaping the fate of spot Bitcoin ETFs, we are closely anticipating what’s to come.