Will the spot bitcoin ETF get the green light for the second time?

Yesterday, the bitcoin price shot up and down in a short period of time. The euphoria the market was briefly in gave way abruptly to disbelief and suspicion. No one expected this playbook for bitcoin's most important week ever. What happened? You can read that, and more, in this Weekly!

Market update

Last night at 10:11 pm Dutch time, a message appeared on the official X account of stock market regulator SEC that all ETF applications have been approved. Along with a warning from chairman Gary Gensler that they will keep a close eye on the market. A nice picture with logo and quote in the SEC's house style completed it.

It turned out to be - yep - fake news.

Exactly 15 minutes later, Gensler informed via his personal account that @SECGov had been hacked, and that the SEC had not yet given approval for anything at all. Apparently, they also quickly regained possession of the official account, because another 15 minutes later Gensler's notification was repeated there, and the original message deleted.

The jokes and gags on CryptoTwitter were unrelenting. It was ironic too: the SEC's mission is "protecting investors" and they of all people post a misleading notice. They regularly remind investors to properly secure their accounts with strong passwords and multifactor authentication. While they themselves had not enabled the latter.

In October, the market was also briefly under the impression that the BlackRock ETF had been approved. Then CoinTelegraph had put out a false report. The SEC's response then was: "Careful what you read on the internet. The best source of information about the SEC is the SEC."

The chart below shows how the price reacted to it. Quite modestly, actually. The share price ended the evening around $46,000. That's a fraction lower than before the fake approval, but still a good 8% higher than the opening of the year at $42,500.

The top was slightly below $48,000 yesterday, the highest point since March 2022. That price level represents the upper limit of the current price range and will not give in easily. Moreover, the market's lacklustre reaction shows that we should not expect a price explosion in the event of a genuine approval.

This is not surprising. Approval of the ETFs is presumably already largely factored into the current share price. Experts at Bloomberg have been using a 90% success rate for months, and the ETF providers themselves are even more confident. Some have even already made advertising pitches.

What cannot be properly priced in, however, is the actual inflow of new capital that these ETFs will need to access bitcoin. Of course, large speculators will have bought bitcoin in recent months with the aim of selling their positions to the new capital soon. But it is easy to imagine more new capital flowing in over the next year than has been speculatively bought up.

All in all, the coming weeks are exciting and unpredictable. The price of bitcoin has been in something of a holding pattern for over a month, and the enthusiastic price rises of altcoins have come to a halt. In Bitcoin Alpha's Discord community, four scenarios have been described for bitcoin in the coming weeks. Curious? Check out the action below!

News summary

You understand: everything this week revolves around the US dance between fund managers and the regulator. As many as 11 parties are set to compete in the Cointucky Derby. ETF specialists Nate Geraci and Eric Balchunas gave this name to the ETF race that is about to begin. In doing so, they compare it to the famous Kentucky Derby, a horse race that attracts 155,000 spectators annually. Only the SEC's starting gun is still missing.

Fund managers are trying to outdo each other on all fronts. They use the fees they charge for managing their funds as their main weapon. The lower they set them, the more painful it becomes for the competition. It creates an arms race of unprecedented proportions, according to analysts. So-called fees are reaching the low levels they know only from the largest and most liquid equity funds, such as the S&P-500.

For most fund managers, they are holding their cards to the last minute. Why? They want to prevent competitors from checking off their preparation for the horse race. The race is all about bringing in as much capital as possible. The bigger a fund gets, the more likely it is to emerge victorious over months and years.

It looks like a bloody battle awaits the public. The market for ETFs is a game of network effects. Bloomberg specialists James Seyffart and Eric Balchunas said the following in a recent interview with Natalie Brunell: "The most liquid ETF wins. Once this winner is crowned, network effects occur and competing on low costs alone is no longer possible."

In short, it will be a battle for the inflow of new capital. That comes with the necessary amount of marketing. Several fund managers have already published their television advertisements. VanEck is trying to win the sympathy of seasoned bitcoiners by promising to donate a portion of its profits to bitcoin developers. What BlackRock will do? That is not yet known, but everyone seems to agree that we are on the eve of an extended marketing war.

We'll keep a close eye on our timelines!

Other news:

• Japan's largest marketplace Mercari is going to support bitcoin payments. By 2024, its more than 23 million monthly active users will be able to settle their second-hand items with bitcoin. Payments will be made through subsidiary Melcoin, which will convert the sats received directly to Japanese yen. More than half of Melcoin's users shopped on Mercari after selling bitcoin assets. 
• 'Private city' Próspera recognises bitcoin as a unit of account. That means the market value of goods and services can now be expressed in bitcoin. Earlier, the Special Economic Zone in Honduras recognised bitcoin as legal tender. Honduras' current president wants to repeal the law on which private initiatives like Próspera are based. The city is still largely under construction.
• Visa close to launching new Web 3 loyalty system. Major brands can use Visa to provide their customers with wallets, providing them with points and experiences in the form of unique digital assets. These can be earned through "gamified giveaways" and "immersive treasure hunts", says Visa director Kathleen Pierce-Gilmore. "With our innovative solution, customers can be rewarded not only for their transactions, but also for their engagement."