Bitcoin ETF Announcement Unlikely to Disrupt Bitcoin Market: K33 Analysis

The U.S. Securities and Exchange Commission (SEC) is on the cusp of a critical decision regarding Bitcoin spot ETFs, and market dynamics suggest a tempered response is likely. K33 Research analysts Vetle Lunde and Anders Helseth indicate a shift in market sentiment following last week’s significant leverage shakeout. Consequently, fears of a sell-the-news event after the SEC’s decision are subsiding.

Moreover, the recent market turmoil has led to a reduction in open interest in Bitcoin perpetual contracts. Between January 2nd and 6th, there was a 12% decline in notional open interest, with funding rates stabilizing at a neutral level. This change suggests a less speculative market environment, bolstering the market’s resilience against potential profit-taking post-ETF announcement.

CME’s Record High Open Interest

In contrast to the general market trend, the Chicago Mercantile Exchange (CME) witnessed a surge in open interest, reaching a historical peak of 131,620 BTC, valued at approximately $6.1 billion. This trend reflects continued short-term optimism among professional traders. Moreover, CME premiums are experiencing a healthier trend compared to earlier fluctuations.

Bitcoin ETF Announcement and Fee Strategies

The market eagerly anticipates the SEC’s decision, which is expected by January 10. Despite the general expectation of approval, volatility is likely as the verdict nears. In preparation, multiple firms have amended their S-1 forms, aligning with the final stages before potential SEC approval.

Competitive fee structures are central to the offerings of prospective ETF issuers. Bitwise leads with an initial zero-fee policy for the first six months or until $1 billion in assets are reached, followed by a long-term fee of 0.2%. Ark/21Shares and VanEck also present attractive fee models, while BlackRock proposes a competitive fee, further reduced for the initial 12 months or until the fund achieves $5 billion in assets. 

Grayscale, converting its existing bitcoin trust into an ETF, adjusts its fee to 1.5%, aiming to retain its substantial customer base despite higher fees than competitors.

Outlook and Expectations

The low fee structures will likely spur investment attractiveness and reduce BTC selling pressure, as issuers will liquidate less BTC to cover fees. With the SEC’s decision impending, the market braces for the potential onset of spot ETF trading, which could commence as soon as the day after approval, with Valkyrie and VanEck anticipating a Thursday launch.

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