Matrixport analyst Markus Thielen said the Securities and Exchange Commission will likely reject all bitcoin spot ETF proposals this month.
Thielen argued the applications still fall short of a critical requirement that must be met before the SEC can approve them
In contrast to broad market consensus, Matrixport analyst Markus Thielen anticipates that the Securities and Exchange Commission will decline all bitcoin spot ETF proposals in January.
Despite the frequent meetings and updated S-1 prospectuses between filers and the SEC in recent weeks, Thielen pointed out in a report that these applications still fall short of a critical requirement that must be met before the SEC can approve them.
Thielen based his perspective on the political dynamics and compliance concerns. The analyst argued that while an ETF would help enable crypto to take off in the U.S., the SEC chair still sees the industry as needing more stringent compliance.
“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,” Thielen wrote. “This might be fulfilled by Q2 2024, but we expect the SEC to reject all proposals in January.”
"There's been far too much fraud and bad actors in the crypto field," Gensler told CNBC last month. "There's a lot of non-compliance, not only with the securities laws, but other laws around anti-money laundering and protecting the public against bad actors there," the SEC chair added.
What happens if bitcoin spot ETFs are rejected?
The crypto industry has been vying for a spot bitcoin ETF for years, with BlackRock, Fidelity, Franklin Templeton, Valkyrie and VanEck among the current total 14 asset managers hoping to finally win SEC approval.
If the bitcoin spot ETF applications are denied by the SEC this month, Thielen expects to see cascading liquidations as billions of dollars in perpetual long bitcoin futures unwind. This could lead to bitcoin’s price dropping sharply by around 20%, back into the $36,000 to $38,000 range, he said.
Bitcoin BTC -6.80%
is currently trading at $44,562, according to The Block’s price page. The largest cryptocurrency by market cap, marking the 15th anniversary of its genesis block today, is up around 5% since the start of the year and 65% over the past three months.
Despite potential short-term volatility following an SEC denial, Thielen’s forecast for 2024 remains bullish. Drawing on historical patterns of U.S. election years and Bitcoin mining cycles, Matrixport anticipates bitcoin's value to surpass its starting point of $42,000 by the end of the year, offering a silver lining to long-term investors amid the regulatory uncertainties..