Markets grow on rumors and fall on facts. Particularly volatile in such cases are the movements of risky assets. False information that the Securities and Exchange Commission would approve Black Rock and other companies' applications for creating spot-ETFs in 2023 laid the foundation for a BTC/USD rally. Matrixport's announcement that on January 10th, the SEC will reject the applications caused the leader of cryptocurrencies to plummet by 10% from the levels of 21-month highs. According to Coinglass, this led to the liquidation of positions worth $600 million in digital assets across all major exchanges.
In reality, it's hard to imagine a small company like Matrixport crashing a trillion-dollar market. Bloomberg Intelligence believes there is a 90% chance that the Securities and Exchange Commission will approve applications for creating ETFs with bitcoin as the underlying asset. Otherwise, the SEC will face numerous lawsuits from Black Rock and other companies. It's believed that the operation of such specialized exchange-traded funds will attract big money to the digital assets market and allow BTC/USD to grow even higher.
Not everyone agrees with this. Rumors about the SEC's approval of the applications have already boosted bitcoin's quotes by 170% over the last 12 months. Good news is already factored into the price, and a sell-off may occur on January 10th on the facts. According to K33, there is only a 5% chance of a negative verdict from the Securities and Exchange Commission, which would shock the markets. The company gives a 75% chance of selling BTC/USD on the facts and 20% for further price growth.
Bitcoin's reaction to Matrixport's opinion shows that investors' nerves are stretched tight in anticipation of the SEC's verdict on January 10th. Cryptocurrency has demonstrated a different dynamic than American stocks. The Christmas rally of the S&P 500 has come to an end, which should be reflected in all risky assets.
Dynamics of the S&P 500 and Bitcoin
The correction of the broad stock index is based on inflated expectations of a 150 basis points cut in the federal funds rate to 4% in 2024. The Federal Reserve is clearly not going to rush to relax monetary policy, investors are beginning to understand this and are taking profits on long positions in American stocks. The pullback could be quite deep if U.S. labor market data for December are either very pleasing or disappointing.
Bitcoin, however, is supported by information about the SEC's approval of Black Rock and other companies' applications for creating spot-ETFs, as well as the expected halving in 2024. The correction potential of the sector's leader seems limited.
Technically, on the daily chart of BTC/USD, there was an unsuccessful play of the triangle. The inability of the "bears" to consolidate outside its lower boundary indicates their weakness. If the market does not go in the direction it was expected to, it's more likely to go in the opposite direction. Therefore, breaking resistances at 44,400 and 45,500 could be the basis for forming long positions.