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Cryptocurrencies Amid SEC Decision on Spot Bitcoin ETFs

James L. Flint

• January 10, 2024

Cryptocurrencies experienced a volatile trading session on Wednesday as traders anxiously awaited the decision of the Securities and Exchange Commission (SEC) regarding the approval of spot Bitcoin exchange-traded funds (ETFs). The value of digital assets has been on the rise for months due to hopes of ETF approval. The anticipation reached a fever pitch after the SEC's social media account was breached on Tuesday, falsely proclaiming that the funds had been approved.

The protection against fraud and market manipulation in the crypto space has been a significant concern for the SEC. Hence, it repeatedly postponed making decisions on approving spot Bitcoin ETFs throughout the last year. However, with a final deadline of Wednesday looming for various proposed funds, the anticipation within the crypto community has intensified this week. The frenzied trading that ensued after the deceptive SEC post serves as evidence of the heightened excitement surrounding this matter.

The Pump-and-Dump Effect of Crypto Scams: What Lies Ahead for Bitcoin

Despite recent wild swings in Bitcoin, a spotlight has been shone on the pump-and-dump effect of crypto scams. Investors eagerly await regulatory approval of spot Bitcoin exchange traded funds (ETFs), and fraudsters have seized the opportunity to exploit this desire for legitimacy. "Still, Bitcoin remains at two-year highs as official approval is still expected to be granted for the first wave of ETFs," says Susannah Streeter, an analyst at broker Hargreaves Lansdown.

Analysts widely anticipate that spot Bitcoin ETF approval in the U.S. is just a matter of time, and not a question of if. While some market participants may anticipate a "buy the rumor, sell the news" scenario, there is evidence to suggest that the approval of these funds will provide long-term support for crypto prices.

A spot Bitcoin ETF has the potential to generate a fresh wave of interest in digital assets, particularly among institutional investors who have been hesitant to enter the crypto market due to regulatory scrutiny. With the blessing of the SEC, these funds would hold actual Bitcoin tokens rather than just futures contracts. This could lead to increased demand for Bitcoin as investors flock to ETFs that automatically purchase the cryptocurrency.

Following a phenomenal 2023 that saw Bitcoin prices more than double, the flagship digital asset has continued its ascent, gaining an additional 10% since the beginning of 2024. The limited token supply has further fueled these gains, as long-term investors have chosen to hold onto their Bitcoin rather than sell. Low liquidity levels have contributed to volatile trading in the crypto market, which may result in significant price movements once ETF approval arrives. Until then, brace yourself for more volatility.