Bitcoin Turmoil: $400M Liquidation in 2 Hours Amid SEC ETF Rejection Fears

Market turbulence surrounds the SEC's expected rejection of all ETF applications this month.

In a recent development, financial services company Matrixport predicts the Securities and Exchange Commission (SEC) will reject all Exchange-Traded Fund (ETF) applications this month. This anticipation has triggered a significant downturn in Bitcoin's value, with a staggering $400 million liquidated in just two hours.

Bitcoin ETF Approval Fears

Bitcoin witnessed an 8% decline on Wednesday as concerns over the potential approval of a spot Bitcoin (BTC) ETF intensified. This drop nullified the entire positive trend observed on January 1, leading to the liquidation of positions worth $500 million across various derivatives exchanges.

ETF Uncertainty and Market Reaction

GreeksLive, an options analyst, noted a diminishing likelihood of the ETF's approval, causing a market stalemate. Factors such as weakness in crypto mining stocks and the sell-off in several crypto-related U.S. stocks further fueled market skepticism. Last week, Reuters hinted at the imminent approval of a Bitcoin ETF, suggesting it could happen on either Tuesday or Wednesday.

Matrixport's Cautious Outlook

Contrary to optimistic expectations, Matrixport expressed skepticism, stating that all applications fall short of a critical requirement necessary for SEC approval. While there's a possibility of meeting these requirements by Q2 2024, Matrixport expects the SEC to reject all proposals in January.

Bitcoin's Price Volatility

Following an early peak at $45,500, Bitcoin plummeted to $40,550 before recovering to $42,200. This price swing resulted in a $2 billion reduction in open interest due to liquidations, the decreasing value of BTC, and traders adjusting their exposure on both the long and short sides.

Bitcoin faces a turbulent period marked by uncertainties surrounding ETF approvals and significant market reactions. The recent liquidation of $400 million worth of positions highlights the sensitivity of the market to regulatory developments.

The current market scenario underscores the challenges Bitcoin encounters, with regulatory hurdles impacting investor sentiment. The rejection of ETF applications adds a layer of uncertainty, contributing to the recent market downturn. Investors are advised to exercise caution and stay informed amidst this volatile environment.