According to a recent estimate by data analytics company CryptoQuant, should bitcoin spot exchange-traded funds (ETFs) be legalized, bitcoin would increase to a value of $900 billion and the overall cryptocurrency market will grow by $1 trillion. 

No doubt this is very ambitious and this latest prediction follows the recent rumour-fueled BTC pump and dump, which liquidated over $100 million dollars of both long and short positions. 

CoinGlass data shows that $72 million worth of short positions were liquidated on the move to $30,000 and $31 million in longs were liquidated during the correction. 

Liquidation occurs when an exchange forcibly terminates a trader’s leveraged position due to a partial or entire loss of the trader’s initial margin. It occurs when a trader is unable to fulfil the margin requirements for a leveraged position, this means the trade does not have adequate liquidity (cash) to keep the transaction open.

The BTC pump and dump referred to earlier was caused by a now deleted tweet by popular crypto news platform, Cointelegraph stating that the United States Securities and Exchange Commission had approved BlackRock’s iShares spot Bitcoin exchange-traded fund, or ETF. 

This tweet was picked up by other news outlets and news aggregator accounts and the rumour spread like wildfire sparking a buying frenzy. And while there are about eight to ten ETF applications under consideration by the SEC, in the case of BlackRock’s ETF application, much of the excitement is tied to the fact that the largest asset manager in the world showed interest in moving deeper into crypto markets. 

BlackRock’s application alone was seen as a validation for the entire crypto industry, with comments made by BlackRock CEO, Larry Fink, who argued that a monetary asset untethered to any national government will become increasingly attractive. 

Spot crypto ETFs allow investors to get exposure to digital assets without having to buy and hold them; the financial vehicles are publicly traded and track the performance of an underlying asset or index.

Last week, news broke that the SEC won’t appeal the loss in its case against Grayscale, which is thought to boost the chances of GBTC eventually being converted to a spot ETF. However, the SEC website shows no approvals for a spot bitcoin ETF. And the perpetrators of the fake news have come out to apologize for their mistake. 

While it has also been reported that the BlackRock application is still under review, one thing is clear; there’s a pent up demand for these traditional financial instruments, or at least money on the sidelines waiting to trade the news around ETFs, at least evidenced by the BTC pump to 30k.

With money on the sidelines waiting for the news and the Grayscale victory which the SEC has refused to appeal, market analysts now expect the SEC to go ahead and approve Grayscale’s application and the many others pending review.

Bitcoin’s market cap currently stands at $550 billion, according to CoinGecko data. The price action on the Bitcoin 1-day chart shows the pump to and rejection at the 30k price mark, this sent the price back down to the 28k price mark comfortably up from the 25k resistance. This points to the market bullishness on Bitcoin. 

The sentiment for positive ETF news is a major factor as Blockworks reported, the Binance BTC/USDT trading pair, which accounts for 8% of bitcoin daily trading volume, saw a 7% green candle roughly 30 minutes after the Cointelegraph rumour was posted. 

The chart is healthy and as far as retracements are concerned the 27.789 price point might be crucial to see deciding where we go from here. Obviously Bitcoin ETFs are a big deal for seasoned crypto traders and traditional institutions looking to gain access to trading bitcoin without directly holding the asset. A traditional financial wrapper for the novel bitcoin asset class would, therefore, act as a bridge to that sidelined capital. Some estimate billions of dollars could flow into a spot market bitcoin ETF. 

Although, the great interest in bitcoin ETFs may have as much to do with the fact that the investing public has been denied thus far. Since the Winklevoss twins’ unsuccessful proposal in 2013, the SEC has rejected every spot-based BTC ETF application it has reviewed. 

The SEC’s argument has often revolved on the concept of market manipulation, owing to bitcoin’s relative illiquidity (liquidity is distributed across the multiple exchanges that offer BTC) and the lack of appropriate market “surveillance” mechanisms.

Final thoughts

Crypto markets are in need of fresh capital, especially after over $100 million in options were liquidated during the Cointelegraph-BlackRock-ETF rumour, and many are still hanging their hats on the idea that mass adoption will come and ETFs will be one of the main vehicles to help reach that destination. 

The idea that ETFs will drive institutional adoption is plausible, as evidenced in the numerous applications from a number of traditional finance firms including BlackRock, Fidelity and VanEck. These firms will create a direct link for Bitcoin to be traded in new ways that will only serve the purpose of core Bitcoin hodlers and traders.

And to core Bitcoin hodlers and traders and the wider crypto market players, interest in bitcoin ETFs stems from this never ending need to find something to be bullish about. The fact that markets have been deprived of ETFs only makes them more appealing. This will put to bed some calls for “regulatory clarity,” and will simultaneously create the foundation for future adoption.

Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.

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