The crypto market is underestimating the growth of spot Bitcoin ETFs

The crypto market is dramatically underestimating the approval of an exchange-traded fund (ETF) to raise prices, according to analysts at crypto research firm K33 — formerly Arcane Research.

In a Sept. 5 market report, K33 senior analyst Vetle Lunde and vice president Anders Helseth said the past three months have greatly improved the chances of spot Bitcoin ETF approval, but that sentiment has not been reflected in the price of Bitcoin or other major cryptocurrencies.

Analysts explained that while Bitcoin has almost given up its gains in light of Grayscale’s legal victory over the Securities and Exchange Commission (SEC), the approval would “attract enormous inflows” and significantly increase the buying pressure for Bitcoin.

However, the downside of a potential spot ETF rejection would be “negligible” and Bitcoin prices would simply remain as usual, they wrote.

Lunde and Helseth added that given the increased likelihood of spot approval for ETFs — with several Bloomberg analysts now predicting a 75% chance of approval within the year – the market outlook for ETFs is fundamentally incorrect.

“I firmly believe that the market is wrong. This is, by all accounts, a buyer’s market and it would be imprudent not to aggressively accumulate BTC at current levels.”

Backing up their bullish predictions, analysts pointed to a recent 2% rise in the tech-heavy Nasdaq-100, which is often seen as an indicator of the broader market’s risk appetite.

Chances of ETF approval increasing

Although bitcoin lost all of its gains following the news and fell below $25,000, Lunde and Helseth argue that the approval of a spot bitcoin ETF would trigger a massive financial inflow, exponentially amplifying the buying pressure.

“Over the past three months, the outlook for ETF approval has improved significantly, but prices have not kept pace with that change. We believe the market is making a mistake. The current market appears to be biased towards buyers, and we think it is wise to aggressively accumulate bitcoin at current prices,” said Lunde and Helseth.

They explained that Ether could follow a similar path to Bitcoin which gained roughly 60% in the weeks leading up to the launch of the first ETF based on Bitcoin futures on October 19, 2021.

A ruling on the futures-based Ether ETF is expected in mid-October, which is said to require the green light from the SEC.

It is widely believed in the crypto community that the SEC will likely delay a decision on ETFs until the very deadline for making a decision, which could stretch all the way to spring 2024. It looks like the bulls will have to be more patient.