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Bitcoin Price Tumbles as SEC Delays Throw Grayscale ETF Into a Limbo

Last Updated December 11, 2023 10:19 AM
Teuta Franjkovic
Last Updated December 11, 2023 10:19 AM

  Key Takeaways

  • The SEC delayed its decision on a spot ETH ETF proposal from Grayscale disappointing the crypto community.
  • Bitcoin’s price drop and the SEC’s announcement liquidated nearly $100 million in long positions.
  • Crucial US economic data and the Fed’s interest rate decision are expected to contribute to market volatility.

The United States Securities and Exchange Commission (SEC) has extended the timeframe  for its decision on whether or not to approve a spot Ether exchange-traded fund (ETF) proposal from asset manager Grayscale.

The news, along with other market factors, sent the price of Bitcoin (BTC) tumbling and sparked concerns among its advocates.

Crypto Market Roiled by SEC Delay and Bitcoin’s Plunge

The delay has been met with disappointment  by many in the cryptocurrency community. They had hoped that the approval of the rule change would lead to increased institutional investment in Ethereum (ETH), the second-largest cryptocurrency by market capitalization.

Bitcoin has dropped by more than 7% since the SEC’s announcement . This is due to a combination of factors, including the delay in the Grayscale Ethereum Trust’s approval and concerns about the broader economic outlook. The largest cryptocurrency dropped to around $40,000 on December 11, its lowest level in a week. Not long after, its price recovered  and stood at $42,261.

It is important to note that the SEC’s decision is not a final ruling. The agency is still accepting public comments on the proposed rule change. It is possible that the agency will ultimately approve the rule change. It is also possible that it will reject it or delay it further.

The SEC’s decision has also raised concerns about the future of cryptocurrency regulation in the United States. Some fear the agency may be taking a more restrictive approach to cryptocurrencies. This, in turn, could potentially stifle innovation and growth in the industry.

Bitcoin’s 7% Plunge Liquidates Millions, Triggers Altcoin Panic

Bitcoin’s return to test support caught investors off guard, leading to the liquidation of nearly $100 million  in long positions. This abrupt move served as a wake-up call at the beginning of a week that holds various potential triggers for volatility.

Bitcoin’s volatility made a swift return after a relatively calm weekend. Contrary to the recent “up only” trading trend, BTC/USD experienced a significant 7% drop. Within hours, it reached a low at $40,660 on Bitstamp . This unexpected downturn resulted in a 5% decline in just a few minutes, adversely affecting leveraged long traders.

Data from CoinGlass  indicated the long liquidation amount reached $86 million on December 11, with cross-crypto long liquidations exceeding $300 million for the day.

Credit: TradingView

Michaël van de Poppe, founder and CEO of trading firm MN Trading, urged investors , especially those involved in altcoin trading, to remain calm.

Volatile Week as Macro Data and Fed Decision Approach

The upcoming week features crucial United States macroeconomic data preceding the Federal Reserve’s decision on interest rate policy , adding to potential volatility across various assets, including cryptocurrencies.

Following its recent downward mining difficulty adjustment, Bitcoin seems to be cooling off after a period of almost uninterrupted growth. Traders and analysts are anticipating unexpected developments in BTC price action, introducing market uncertainty with just three weeks remaining in the year.

The Consumer Price Index (CPI)  and Producer Price Index (PPI) reports for November are scheduled for release on December 12 and 13. The PPI release coincides with the Federal Reserve’s decision on interest rate changes.

While the upcoming data releases hold significance, they are unlikely to have a direct impact on policy decisions, as the Fed has already considered multiple other indicators, showing a decline in inflation . The recent exception was the unemployment figures released last week. These revealed that restrictive financial conditions were not having the intended impact on suppressing the labor market.

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