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Bitcoin Faces 8% Slump Amid ETF Approval Uncertainty

Wednesday's market sees an 8% decline in Bitcoin as approval uncertainty looms for a spot Bitcoin ETF.

by Alexander
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Bitcoin witnessed an 8% decline on Wednesday, erasing gains from January 1, triggered by growing uncertainty around the approval of a spot Bitcoin ETF.

Market Jitters and $500 Million Liquidation

Investor apprehension regarding the potential approval of a spot Bitcoin ETF has permeated the market, leading to a substantial 8% slide in Bitcoin prices. This downturn resulted in the liquidation of positions worth $500 million across various derivatives exchanges.

ETF Approval Doubts and Market Skepticism

Analysts attribute the market’s skepticism to diminishing prospects of the ETF’s approval. Options analyst GreeksLive stated, “The likelihood of the ETF’s passage became less and less likely, and the market saw a stalemate.” Additionally, weaknesses observed in cryptocurrency mining stocks and the sell-off of several U.S. stocks related to crypto further fueled market skepticism.

Mixed Signals on ETF Approval

Contradictory signals regarding the ETF approval have added to the uncertainty. Last week, Reuters reported that a Bitcoin ETF could potentially receive approval by “Tuesday or Wednesday,” citing undisclosed sources. However, financial services firm Matrixport countered these optimistic expectations, expressing skepticism. Matrixport stated, “We believe all applications fall short of a critical requirement that must be met before the SEC approves. This might be fulfilled by Q2 2024, but we expect the SEC to reject all proposals in January.”

Market Reaction and Ongoing Concerns

Bitcoin’s value fluctuated during the day, reaching a morning high of $45,500 but later dropping to $40,550. Eventually, it rebounded to $42,200. The market’s uncertainty and the looming rejection fears led to a reduction in open interest by $2 billion, influenced by both BTC’s diminishing value and traders adjusting their exposure on both long and short positions.

The entire episode underscores the cryptocurrency market’s sensitivity to regulatory developments, with investors closely monitoring potential ETF approvals and their significant impact on Bitcoin prices.

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