As we stand on the cusp of 2024, the cryptocurrency market is abuzz with expectations that U.S. regulators will greenlight Bitcoin ETFs in the coming year. This anticipation has become a pivotal force behind the recent surge in Bitcoin prices, marking an impressive 49% gain since October. Notably, analysts, including David Liang from Path Crypto, point to a potential slowdown as the market gears up for the April 2024 halving.

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• U.S. Securities and Exchange Commission anticipates ruling on spot Bitcoin ETFs, potentially influencing Bitcoin’s market value in 2024.

• Bitcoin’s price experiences a significant surge ahead of the halving event, with a 49% increase since October due to optimistic market sentiment.

• Institutional investors demonstrate a bullish outlook on Bitcoin’s future, with CME Group reporting record levels of Bitcoin futures open interest.

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U.S. Regulators’ Decision on Bitcoin ETFs Could Shape 2024 Crypto Landscape

The surge in Bitcoin’s value can be traced back to the optimistic outlook surrounding the approval of spot Bitcoin ETFs. The Securities and Exchange Commission (SEC) is expected to make decisions on multiple ETF applications simultaneously, a move deemed necessary for logistical consistency.

In spot BTC trading, several exchanges, namely Coinbase, Binance, Bybit, and OKX, command about 65% of the market. Binance secures the most significant share at 35.5%, with Bybit, OKX, and Coinbase contributing 11.3%, 9.2%, and 8.9%, respectively. Notably, the average BTC order size has dwindled to approximately,652, signaling potential shifts in trading dynamics.

Examining Coinbase’s trading summary for the third quarter of 2023 reveals a pattern of declining volume in three out of the last four quarter-over-quarter measures. Both retail and institutional traders share a similar fate, with retail and institutional customers trading about .2 billion and .7 billion in the third quarter, respectively.

Delving into Bitcoin futures markets, CME Group emerges as a significant player, with BTC futures open interest reaching .55 billion, constituting roughly 25% of total BTC open interest. Asset managers and leveraged funds hold most CME BTC futures positions, each displaying distinct biases. Asset managers lean towards a long bias, reflective of their longer time horizons, while leveraged funds exhibit a short bias, engaging in basis trading and hedging.

Institutional investors are making more pronounced forays into the crypto space. CME Group notes that “average large Bitcoin open-interest holders, with at least 25 contracts, hit an all-time high the week of November 7, 2023.”

Examining the funding rate and aligning perpetual futures prices with spot prices reveals a trend that has moved in tandem with the spot price of BTC. This suggests an overall bullish sentiment in the market. The historical correlation between BTC prices and consumer interest has loosened, prompting questions about the influence of institutional investors on recent price movements.

Despite the positive momentum anticipated from an ETF approval, caution is advised, as profit-taking may offset initial gains, leading to a reversion to the mean in the days following the announcement. Subsequently, the market is expected to recalibrate its focus on the impending halving scheduled for April 2024.

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