According to the latest report, Bitcoin market has “almost become boring” as there is not much activity going in the market. With Bitcoin ETF decisions continuing to affect the market, it shares some insights.
Bitcoin getting adopted as a store of value?
“One can argue that the depressed volatility patterns we’re seeing with bitcoin is the market slowly adopting bitcoin as a SoV,” states the report by Element Group written by Thejas Nalval and Kevin Lu, which is a “fun theory but premature”.
With the trading range of Bitcoin bound within 10% band, “the market has quite simply just run out of juice for now. It’s almost become boring.”
They also point out the fact that exchanges are offering an “unsophisticated retail investor” the opportunity to make short term bets with significant leverage.
“The market is still nascent and that market microstructure has a long way to go before being fully efficient. But we believe that a dynamic where side wagers on the price of a cryptocurrency become so large that they drive the actual price of the cryptocurrency will hinder this road to price discovery efficiency.”
Bitcoin market continues to be affected by ETF
The report also notes that the market is still reacting to the changes in approval of a Bitcoin ETF by SEC. In VanEck SolidX Bitcoin ETF delay,
“immediately after the SEC order was released to the public, bitcoin sold off by a small amount but rallied overnight as traders began to digest the news.”
Talking about the market reaction in “response to what should have been a widely expected procedural delay,” it notes a number of reasons for the same.
With 10 Bitcoin ETF proposals already rejected by SEC,
“The fact that the SEC has not come out with an outright rejection given their recent orders means that the possibility of an approval further down the line exists.”
Moreover, the analyst says
“the SEC’s order to institute proceedings on the VanEck SolidX ETF could be interpreted as a new level of openness on behalf of the SEC due to the amount and type of questions that they have asked.”
It also explains the difference in VanEck and previous Bitcoin ETFs with the fact that, VanEck Bitcoin ETF is “striking the fund’s NAV to a bitcoin OTC index rather than a price set on the spot exchange or derivatives market” to mitigate the concern of manipulation.
The report concludes with, “market participants should be open to the possibility that a bitcoin ETF will not be approved in the next one or two years. To the extent that some possibility of approval is priced in, the market could experience material weakness if a disapproval order is issued.”