The Bitcoin Spot ETF Can't Be Priced In

With so much speculation and so many rumors about the Bitcoin Spot ETFs, are they already priced in? The answer is a very clear and resounding, No.
6 min read
Bitcoin Spot ETF Approval

When looking at markets, there is a typical source of truth in the ideology of “buying the rumor and selling the news.” It's thought that if good news is expected, the price of an investment will increase leading up to the announcement but will not necessarily continue increasing after the announcement.

That is, rumors can have one impact on price and the news can have the opposite; the optimal time to buy is before the news is real, and the best time to sell is in the moments immediately before or after the news is revealed.

There have been months of rumors regarding the approval of multiple Bitcoin Spot ETFs. There have been months of reporting on these applications being denied, updated, and slated for early January 2024 approval. There have been months of speculation and buying of Bitcoin which has led to a dramatic price increase over the last year. With all these rumors, is an ETF approval already priced in for Bitcoin?

The easy and most important answer is it doesn’t matter. When there is only one clear destination for where Bitcoin is going in the future—up—it doesn’t matter if the approval is priced in. The best time to buy and hold Bitcoin was yesterday and the second best time is now. Zoom out and realize any notion of it being “priced in” simply does not matter. 

But the actual answer to this question is it can’t be priced in. 

How You Should Be Viewing the ETF Approval Question

It can’t be priced in because this is not like waiting for a company’s quarterly earnings report. With stocks, analysts can predict whether the company smashed expectations or failed to reach them. In that case, the “buy the rumor and sell the news” applies directly. But Bitcoin has no revenue to report and its price is a direct function of the supply and demand for Bitcoin in the market. There are no real predictions to be made except for the amount of demand that will be coming into the limited supply of 21 million Bitcoin. 

Analyst Bitcoin Spot ETF

It can’t be priced in because approving a batch of Bitcoin Spot ETFs onboards the traditional financial sector to Bitcoin in a way never before seen. Once approved, there will be billions of dollars slated to purchase Bitcoin and join the Bitcoin economy. New dollars. New dollars that are not currently allowed to be in the market and therefore cannot be priced in yet, as the current market (missing 100% of those new dollars) doesn't have the capability to do so. It's a logic fail.

After the Spot ETFs are approved there will be a multimillion-dollar marketing competition to secure market share for each firm's specific Spot ETF. This is a psychological movement that cannot easily be quantified, but it's safe to assume that any firm with a Bitcoin Spot ETF product will do whatever it can to secure market share by infiltrating the public's eyes, minds, and households.

More people than ever before will have Bitcoin easily accessible and more people than ever before will be aware of what Bitcoin is through these marketing campaigns. There are rumors that there will be a Super Bowl commercial and companies have already produced their versions of advertisements.

You won't be able to escape the news

You won’t be able to avoid news about Bitcoin if you try. The price of Bitcoin can’t be priced in because the approval of Spot ETFs is an admission by the traditional financial sectors that Bitcoin is here to stay and that you, the retail investor, should allocate a percentage of your capital into ownership. 

It’s important to speak beyond why the price can’t be priced in and address the current price action of Bitcoin. Rumors of Spot ETF approvals led to retail investors purchasing and holding Bitcoin at a greater rate, contributing to the price increase we saw over 2023. 

People are buying Bitcoin

This sustained and increased retail investment could mean we see some real downturn if the spot ETFs are not approved. We did see panic in the market where Bitcoin fell from nearly $45,000 to around $40,000 before rebounding after an opinionated report by Matrixport posted that the ETFs would not be approved on January 10th.

Simultaneous to this occurring, over a billion dollars of Bitcoin longs were wiped out perpetuating the quick dump in price. The price will change given either decision for the Spot ETFs.

BTC Open Interest Wiped out

In predicting the near future, it is easy to expect short-term volatility. In the grand scheme of time and the continued adoption and acceptance of Bitcoin, this is a non-story. In choosing to address this volatility, if the ETFs aren’t approved in the coming days, we will probably see a downturn in the short term.

If the ETFs are approved, there is no telling what will happen from a vertical price limit. The reality is we will see an immediate increase in price and over the following days and weeks there may be some pullbacks as people and firms sell their holdings. This is normal, it’s the public market.

Zooming out shows that these changes in the market will only be small blips on the radar after a year or two. After the Gold ETF was approved the price of Gold went on an 8-year bull run delivering 579% gains. In that time frame, there were down days, but if you zoom out, the effects of what a Spot ETF can do are obvious. 

Zoom Out

The increase in Bitcoin price becomes much more linear the more you zoom out your time horizon. The first year of approved Bitcoin ETFs will allow billions of dollars to be exposed to it. Over time, there is no doubt that trillions of dollars from institutional assets will want to have their hands wrapped around Bitcoin. The markets will be volatile during the days leading up to and after January 10th. Given approval, a year from now and beyond, none of this short-term volatility will matter. The only thing that will matter is if you own Bitcoin. 

Again even if it were priced in, it wouldn’t matter if it was. All that will matter in the future is if you own Bitcoin. But the truth is it cannot be priced in. Keep stacking Sats and enjoy the ride. It’s still early. 

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