Bitcoin’s sudden drop of $4,000 within hours is not solely due to panic surrounding the United States regulators’ potential rejection of a spot exchange-traded fund (ETF), according to prominent commentators.
This flash crash led to liquidations of over half a billion dollars in cryptocurrency positions.
The decline in Bitcoin’s price, nearly 9% of its value, coincided with the cryptocurrency’s 15th anniversary on January 3, as reported by Cointelegraph Markets Pro and TradingView.
CoinGlass, a statistics resource, reported long liquidations amounting to $514 million on the same day.
Matrixport, a crypto financial services platform, released a report asserting that the U.S. Securities and Exchange Commission (SEC) is likely to reject the spot ETF.
The report claimed that an ETF approval would catalyze crypto adoption, but the SEC chairman, Gensler, expressed the need for stricter compliance in the industry, implying that there is no political incentive to legitimize Bitcoin as an alternative store of value through a spot ETF.
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However, the report lacked concrete evidence to support its claim, and the official window for the SEC’s decision on the ETF is set from January 4 to January 10.
Some market experts, including trader and podcast host Scott Melker, questioned the rationale behind Matrixport’s perspective.
Others argued that the liquidations observed during the price drop were typical of Bitcoin’s behavior in a bull market.
Joe Carlasare, a crypto-focused litigator, dismissed the idea that the ETF report triggered the sell-off, attributing it instead to the market being overbought and in need of a liquidity squeeze.
Matrixport, anticipating a possible rejection by the SEC, predicted only a modest further decline in Bitcoin’s price.
If the SEC denies approval, the report anticipates cascading liquidations, potentially causing a rapid 20% decrease in Bitcoin’s value, bringing it back to the $36,000-$38,000 range.
As previously reported by Cointelegraph, analysts had already identified the mid-to-low $30,000 range as a likely support level for Bitcoin’s price.
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