Bitcoin ETF Commentary Prompts Alert on Cryptocurrency Leverage Risks

As Bitcoin and the broader crypto market witnessed a sell-off Wednesday, MN Trading founder Michaël van de Poppe advised against taking excessive risks with leverage and recommended maintaining low-limit bids.

Highest liquidation in 2 years

In a post on X, Van de Poppe said, “Massive liquidations today, the largest for #Altcoins in the past two years. Unlikely it will happen again tomorrow or the day after,”

While Van de Poppe is not expecting a repeat of this scenario, the Bitcoin spot market has shown a slow recovery. Simeon Hyman, global investment strategist at ProShares, highlighted spot market issues during a recent Bloomberg TV interview.

He pointed out the price discrepancies of Bitcoin across various exchanges and the inherent risks of these platforms. The strategist raised concerns about the daily settlement processes of Bitcoin spot, which rely on a blend of prices, and expressed skepticism about the practicality of cash creation and redemption mechanisms in this context. Hyman went on to call the spot market slightly “weird.”

Bitcoin ETF will build market optimism

A prolonged market sell-off is not expected due to hopes that the SEC will approve the first spot Bitcoin ETF. Meanwhile, Fidelity Wise Origin Bitcoin Fund recently filed Form 8-A with the Cboe BZX Exchange.Bloomberg’s James Seyffart underlined that it was the registration of its shares.

My understanding here is that this is just a securities registration. In order to list the ETF still needs a 19b-4 approval and they need an effective/approved/completed S-1 document. No 19b-4 yet. And S-1 is still preliminary (seen below). I'm still looking towards next week https://t.co/VsgbpJHMVp pic.twitter.com/Iu31AkUswP

— James Seyffart (@JSeyff) January 3, 2024

However, this is just the initial step. For the ETF to be listed, it still requires 19b-4 approval and an effective, approved, and completed S-1 document, the analyst explained.

As the ETF applicants await 19b-4 approval, FOX Business reported that SEC staff attorneys from the Division of Trading and Markets met officials from major exchanges. An SEC spokesperson clarified to the paper that if the Commission declares a registration statement effective, it will be reflected on EDGAR. Moreover, any Commission 19b-4 orders will be posted on the SEC’s website and then published in the Federal Register.

Also Read: Bitcoin ETF Approval will be bagged this year, Bitwise reiterates

While market optimism took a hit on Wednesday, the global cryptocurrency market cap stands at $1.72 trillion, with daily losses. At press time, Bitcoin (BTC) is priced close to $42,800. BTC saw a 5% decline in the last 24 hours, as per CoinGecko data.