Jan 8, 2023

The wait for the U.S. Securities and Exchange Commission (SEC) to respond to spot bitcoin exchange-traded fund (ETF) applications continues, with a final deadline for at least one application approaching on Wednesday. The SEC must decide whether to approve or reject Ark 21 Shares' application by Jan. 10, and may approve all of the final applications it is comfortable with by that date. Bitcoin has been consolidating after reaching a 21-month high of almost $46,000 as it awaits clarity on the decision. On Monday, bitcoin gained around 2% to reach $45,000 after dropping to $43,400 over the weekend. If the SEC does not approve spot ETFs this week, LMAX Digital said there could be a significant decline in price but noted, “we also expect any pullbacks to be exceptionally well supported above $30k in 2024.” However, if there is an approval, LMAX said it will translate to an immediate rally to the tune of 10%-15%. 

Odds of a spot bitcoin ETF being approved in the U.S. have risen to more than 90%, two influential analysts at Bloomberg said, while crypto market participants at betting platform Polymarket became more pessimistic, trimming the odds to 85% Referring to the likelihood of the SEC rejecting proposals after Friday's flurry of updated filings, Bloomberg ETF analyst Eric Balchunas said in a Saturday post: “I probably go with 5% at this point. But you gotta leave a little window open for these things.” He previously tipped the odds at 90% in November, saying that updated forms at the time indicated providers were moving in the right direction.

ARK Invest sold a further $20.6 million worth of Coinbase (COIN) shares on Friday across three of its ETFs. Cathie Wood's investment firm offloaded a total of 133,823 COIN shares, which closed last week at $153.98. ARK Invest has a target of no individual stock surpassing 10% weighting of an ETF's value. COIN more than doubled in price in the last three months of 2023, heralding consistent sales of the crypto exchange's shares by ARK. Its largest weighing of Coinbase stock is in its Innovation ETF (ARKK), which holds over $850 million worth of COIN. The latest offload brings its weighting down to 10.04%, suggesting the sales from ARKK could be coming to an end, notwithstanding another pump in Coinbase's share price.

The crypto market is squarely focused on the SEC’s decision on spot bitcoin ETF applications due this week. Perhaps rightfully so, as observers have long said an exchange-traded fund investing directly in BTC rather than futures tied to the cryptocurrency will unlock billions of dollars in investments from retail and institutional investors.

Once that's out of the way, the next major event to watch out for could be the quarterly refinancing announcement (QRA) from U.S. Treasury Secretary Janet Yellen's department, due Jan. 29.

With debt and deficits surging in the post-Covid world, the detailing of three-month borrowing needs and the size and duration of bond auctions have begun drawing more interest than usual.

- Omkar Godbole