Matrixport Predicts Bitcoin Price Drop Due to Potential ETF Rejection

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Bitcoin Spot ETF Rejection Could Favour Short Positions

The price of Bitcoin (BTC) could drop to $38,000 or even $36,000 if the U.S. Securities and Exchange Commission (SEC) does not approve an ETF in January. This is according to a report by crypto services firm Matrixport, which had previously predicted that Bitcoin would reach the $50,000 mark by the end of January 2024. Now, the company has revised its forecast.

Why Matrixport is Changing its Forecast

Matrixport attributes the change in its forecast to the potential rejection of a Bitcoin Spot ETF by the SEC. Although there have been frequent meetings between the ETF applicants and SEC staff, Matrixport believes that all applications are missing a critical requirement that must be met before the SEC can grant approval.

The Impact of a Rejection

If the SEC does not approve any of the applications by January 5, all applications would be rejected. The first approval could then only occur in the second quarter of 2024. If there is a rejection by the SEC, it could trigger a chain reaction of liquidations. Matrixport expects most of the additional $5.1 billion in permanent long positions for Bitcoin futures to be settled. This could cause Bitcoin prices to drop very quickly by 20% and fall back to the range of $36,000 to $38,000.

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Short Positions Could Benefit

Based on this forecast, AMBCrypto has reviewed the long/short ratio of Bitcoin. Data from Coinglass suggests that traders are already giving up hope of a positive ETF decision. At the time of publication, the long/short ratio had dropped to 0.97%. If the value is above 1, it means that there are more open long positions than short positions. However, since the ratio is below 1, most traders are bearish about the BTC price development.

The Outlook for Bitcoin

Despite the potential rejection of the ETF in January, Matrixport expects the Bitcoin price to be higher at the end of 2024 than at the beginning of the year ($42,000). The company justifies this by saying that U.S. election years and Bitcoin mining years are typically positive.

Sources: Matrixport, AMBCrypto, Coinglass, Hyblock Capital

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