Crypto Market Outlook 2024: Anticipating the Impact of Bitcoin ETF Approvals

A new report from Kaiko, a top crypto data provider, reveals a surprising trend to follow post-ETF approval and potential ETF outflows, which might trigger selling pressure on the underlying markets. Despite a significant 10% price decline in the third quarter of this year, Bitcoin has seen a remarkable increase in its liquidity.

So, what’s behind this surge in liquidity? Is it a sign that investors are bullish on Bitcoin ETF’s approval or a  long-term prospect? Or is there something else going on? To find out, read on…

Kaiko’s Projections: ETFs as Catalysts for Market Revival

In anticipation of potential spot Bitcoin exchange-traded fund (ETF) approvals, the crypto market has been abuzz, viewing ETFs as a gateway for traditional financial investors to access cryptocurrencies more conveniently.

Several ETF applications are nearing their final deadline in January 2024, prompting speculation about their ability to restore crypto liquidity to pre-FTX collapse levels.

A recent report from Kaiko, a crypto market data provider, labeled ETFs as the primary catalyst for rejuvenating market depth and trading volumes. Market depth suffered significantly post-FTX collapse and remained subdued throughout 2023 despite ongoing market rallies.

Spot ETFs, if approved, would involve sizable Bitcoin purchases from authorized exchanges or holders, potentially elevating trading activity. These ETFs aim to mirror Bitcoin’s actual price, prompting arbitrageurs to continuously buy and sell based on ETF share premiums or discounts compared to Bitcoin’s price. Kaiko suggests a substantial likelihood of improved liquidity in the market once spot ETFs enter the scene.

Market Sentiment 

Previous instances, as reported by Coinpedia, showed substantial capital inflows of $155 billion into the Bitcoin market post-ETF clearance, catapulting Bitcoin’s spot price to a range between $50,000 and $73,000. Recently, Matrixport Research also predicted that Bitcoin will hit the $50,000 milestone in January 2024 if the US SEC greenlights ETFs. With ETF approval deemed highly likely by the firm, recent Bitcoin prices soared to $44,000 while ETF applicants continued their discussions with the SEC.

Presently, Bitcoin holds steady above $42,000, indicating a positive trajectory according to CoinMarketCap’s data. However, the price rebounded 17% before being rejected at $44,716.58. After trading sideways, the bulls lost drive, and the price fell almost 10%.

Crypto Reaction

Michael Saylor has predicted that the upcoming spot bitcoin (BTC) ETFs could be the biggest development on Wall Street in the last 30 years. He anticipates a promising start for Bitcoin and other assets in 2024, citing lined-up events such as ETF approvals in the early part of the year. Bitwise and Cathie Wood were all rooting for this mega event and predicted the approval chances of 98.7%. 

The market’s eagerness for spot Bitcoin ETF approvals remains palpable, with expectations high for these instruments to potentially reshape market dynamics and bolster liquidity in the crypto space.