There’s never a dull day in the world of cryptocurrencies! Yesterday was no exception with the false announcement of the U.S. approval of spot Bitcoin ETFs. Today is likely to be just as eventful, with an announcement expected by the end of the day, whether positive or negative. It goes without saying that this will be the main theme of this week’s communication.

Let’s start with yesterday’s events first. Shortly after the close of the U.S. markets, the SEC’s official Twitter account announced the agency’s approval of the launch of ETFs on spot Bitcoin. However, shortly afterwards, SEC Chairman Gary Gensler quickly clarified that the SEC had not (yet) approved any exchange-traded products for Bitcoin. The false news caused a sudden drop in Bitcoin’s value. Although the tweet was deleted, its impact was felt in the following hours. The SEC stated it is working with law enforcement and other government partners to investigate the incident and determine appropriate actions regarding unauthorized access and any associated misconduct. Some commentators have questioned the need for the SEC, which tends to view cryptocurrencies as a too-easily manipulated market, to investigate itself.

A preliminary investigation revealed that an unidentified individual gained control of the phone number linked to the SEC’s Twitter account to spread this false news about the approval of a Bitcoin ETF. This situation highlights flaws in the SEC’s security measures. X’s security team revealed that the account compromise did not result from a breach of its systems, but from external access to the account’s phone number. The team discovered that the SEC had not enabled two-factor authentication (2FA) on its main account, allowing a hacker to access it. The hacker is believed to have convinced a third-party telecommunications provider to transfer control of the phone number linked to the SEC’s account, facilitating the reset of the password and access to the SEC’s official account.

This incident has sparked reactions from several U.S. senators, including J.D. Vance and Thom Tillis, who wrote a letter to Gary Gensler, the SEC Chairman, criticizing the agency for its lack of operational security and demanding explanations for the incident. They point out that these events raise serious concerns about the Commission’s internal cybersecurity procedures and are contrary to its mission to protect investors. Other members of Congress have also demanded an official investigation into the incident.

The false information conveyed by the hacked account caused significant volatility in the price of Bitcoin, leading to the liquidation of nearly $90 million in long and short Bitcoin positions. These tweets led to an immediate increase in the price of Bitcoin, rising from $46,800 to $47,680, before falling to $45,400 when the tweets were identified as false. This situation triggered a rapid response from traders and automated bots. More than $500 million in futures positions were opened within ten minutes following the initial publication. However, these highly leveraged positions suffered significant losses due to rapid price fluctuations: about $50 million in long positions were liquidated, while $36 million in short positions were affected. It’s likely that the SEC hasn’t heard the last of this blunder, and significant lawsuits may follow.

The crypto community can be counted on to try to take advantage of such a saga in an original way. The false tweet that caused the price of Bitcoin to drop has been immortalized as digital art on the Bitcoin blockchain, thanks to an Ordinal Inscription. After Gary Gensler confirmed that the SEC’s Twitter account had been compromised and used to falsely announce the approval of a Bitcoin ETF, someone archived Gensler’s response in an Ordinal Inscription. Digital artist Billy Restey tweeted that this tweet had been “immortalized on Bitcoin forever”. Since the introduction of the Ordinals protocol last January, more than 53 million Ordinal inscriptions have been created, with Gensler’s tweet attributed to Restey being inscription number 53,995,422. Ordinal inscriptions are often compared to Ethereum-based NFTs for the Bitcoin blockchain. Thanks to updates to the Bitcoin protocol like Taproot, enthusiasts have created works ranging from images and texts to video games, like the original Doom. Recently, Ninjalerts announced that a Super Nintendo Entertainment System emulator had been inscribed on the Bitcoin blockchain.

Despite yesterday’s fiasco, the chances of approval for a spot Bitcoin ETF seem stronger than ever today. A Bloomberg Intelligence analyst now estimates the odds of a spot Bitcoin ETF being approved in January at 95%, as the SEC nears its decision deadline. In a Saturday tweet, Eric Balchunas, an ETF analyst at Bloomberg Intelligence, said he would “probably go with 5%” for the likelihood of the SEC rejecting the current spot Bitcoin ETF applications under review. The first deadline for a decision is this Wednesday. This estimate is an increase from Bloomberg Intelligence’s previous forecast, which assessed the chances of a Bitcoin ETF approval in January at 90%. Balchunas was responding to a tweet from James Seyffart, another Bloomberg Intelligence analyst, who speculated on the “unlikely” scenarios in which the SEC might reject the current applications. These scenarios include Ark Invest withdrawing its application with assurances for March, SEC Chairman Gary Gensler denying the applications for new reasons, or ignoring a court order concerning Grayscale’s ETF bid, leading them back to court. President Joe Biden’s administration could also intervene to prevent this approval.

Cryptocurrency traders and analysts are heavily betting on the approval of a spot Bitcoin ETF in the United States, a sentiment reflected on Polymarket, a prediction market based on cryptocurrency, where over $6.7 million has been wagered. These bets indicate an 85% conviction that the SEC will approve such an ETF by January 15, making it the most popular prediction topic on the platform.

Interestingly, this confidence is not shared by all financial sector players. According to a survey conducted by Bitwise, only 39% of the 437 financial advisors polled are confident that a Bitcoin ETF will be available to American investors in 2024. This means that nearly 60% of the financial advisors surveyed express doubts or uncertainty about the availability of such a product in the near future. This reluctance is notable, especially as many market observers consider the SEC’s approval of a Bitcoin ETF to be almost certain, a matter of time rather than possibility, as suggested by Grayscale in early December. Nonetheless, the majority of investment advisory professionals do not share this confidence, according to Bitwise. The survey also revealed that even if the majority of advisors do not believe in an imminent approval of a Bitcoin ETF this year, 88% of respondents interested in buying Bitcoin for their clients are waiting for an ETF to be available.

VanEck and Bitwise, two major investment firms, are actively positioning themselves for the introduction of spot Bitcoin ETFs. VanEck plans to invest $72.5 million and Bitwise $500,000 in their respective ETFs, in accordance with regulatory documents submitted to the SEC. Bitwise is also considering an additional investment opportunity of $200 million, with Pantera Capital as a potential buyer. “Seeding,” or seed capital, refers to the funds provided to launch an ETF. Although banks and securities brokers often provide this capital, ETFs can self-finance with new capital or existing assets.

Potential issuers of Bitcoin ETFs appear to be engaged in a competition to offer the lowest fees. Spot Bitcoin ETF hopefuls, including BlackRock, VanEck, and ARK Invest, filed amendments to their fund registrations with the SEC on Monday morning to disclose their fee structures. According to analysts, BlackRock’s proposed fee of 0.30% is significantly lower than the industry’s expectations, making competition difficult for other firms. Nevertheless, they are not shying away from trying! For instance, the Bitwise Bitcoin ETF, ARK 21Shares Bitcoin ETF, and Invesco Galaxy Bitcoin ETF will all launch with 0% fees. Even BlackRock’s iShares Bitcoin fund will start with an introductory rate of 0.20% on the first $5 billion before switching to a 0.30% fee. We might witness a titan battle to become the flagship product if such an ETF were to be accepted. This competition, which will certainly be accompanied by publicity, could well give Bitcoin a visibility boost in the coming months.

As the SEC’s approval of spot Bitcoin ETFs seems imminent, Jan van Eck, CEO of VanEck, anticipates that trading of these ETFs could begin as early as Thursday. This prediction bolsters speculations that the SEC will start approving various ETFs from Wednesday. Speaking at a CNBC-organized panel, van Eck emphasized that the SEC’s approach is to not favor any specific ETF issuer, as evidenced by the simultaneous approval of Ethereum futures ETFs. With over ten spot Bitcoin ETFs awaiting final approval, van Eck believes the market will not be dominated by a single winner. He expects a fair distribution of market share among the different funds, which would be beneficial for all. Van Eck also noted that, while the market’s focus is currently on the imminent approval, other favorable factors for Bitcoin, such as the upcoming halving and the potential pause in interest rate hikes by the Federal Reserve, might be underestimated. He positions Bitcoin and gold as potential safe-haven assets. In addition to predicting the imminent launch of his spot Bitcoin ETF, van Eck reiterated his company’s commitment to donating a portion of the ETF’s profits to Bitcoin Core developers, acknowledging their voluntary work on the Bitcoin network. Van Eck compared Bitcoin to gold, encouraging investors to consider the place of Bitcoin in their portfolios, especially if they are interested in store-of-value investments. He highlighted that Bitcoin is a complement to gold, similar to other metals like silver, platinum, or palladium, and deserves consideration in investment strategies.

Recently, an unusual transfer of $1.2 million in Bitcoin was made to the inactive wallet of Satoshi Nakamoto, the enigmatic and pseudonymous founder of Bitcoin. This transfer has raised many questions and theories within the crypto community. On Friday, an anonymous crypto wallet with no previous transaction history sent 26.92 BTC, valued at approximately $1.26 million, to the Bitcoin “Genesis” wallet, used by Satoshi to mine the first Bitcoin block on January 3, 2009. The transferred BTC originated from a Binance account. Crypto users regularly send Bitcoins to the Genesis wallet as a tribute to Satoshi, but these transactions are typically of low value. Sending such a significant amount to a wallet likely controlled only by Satoshi is an unusual event and sparked much speculation over the weekend. Conor Grogan, director at Coinbase, suggested on Twitter that either Satoshi woke up and bought 27 Bitcoins via Binance to deposit into his wallet, or someone just “burned” a million dollars.

Several hypotheses have been put forward, including the possibility of an error or a well-funded marketing stunt by a financial institution in anticipation of the imminent approval of a spot Bitcoin ETF. However, the way this mysterious payment might serve as an effective advertisement for a Bitcoin ETF issuer remains uncertain, beyond speculation about Bitcoin’s mysterious origins. None of the fifteen firms with pending Bitcoin ETF applications have claimed responsibility for the payment. Another theory is related to the new crypto tax law that came into effect in the United States on January 1, requiring recipients of certain crypto payments made in the course of “trade or business” to report these transactions to the IRS or face criminal charges. This unusual move could be an attempt to force Satoshi to reveal his identity.

The Standard Chartered Bank (SCB) recently predicted that the price of Bitcoin could reach $200,000 by the end of 2025. This prediction, issued Monday by Geoffrey Kendrick, head of financial research at SCB, comes amid the anticipation of the approval of spot Bitcoin ETF applications. Kendrick indicated that if ETF-related inflows materialize as expected, a level close to $200,000 by the end of 2025 is possible, in line with their earlier estimates of $100,000 by the end of 2024. Kendrick emphasizes that the approval of ETFs is a key factor in the rise of the BTC price, seeing it as a decisive moment for normalizing institutional participation in Bitcoin. Approval is expected to lead to significant inflow and a substantial increase in the price of BTC. This statement coincides with that of Eric Balchunas, a senior ETF analyst at Bloomberg, who estimated on Thursday that a Bitcoin ETF could attract $100 million over a decade. Balchunas was more optimistic, envisioning a potential of $10 billion in the first year, then reaching between $30 billion and $50 billion over three years, and eventually stabilizing around $100 billion over five to ten years. On Saturday, Balchunas assessed the chances of a Bitcoin ETF being approved by the SEC in January at 95%, leaving a small margin for uncertainty.

Get the popcorn ready, the day might turn out to be as interesting as it is memorable!

The presented information is as of January 10th, 2024, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.