Could the Approval of Bitcoin Spot ETFs Trigger One of the Greatest Wealth Destructions in Bitcoin's History?
Despite Bitcoin proponents touting ETFs as gateways to trillions in new capital; Historical patterns, lack of demand, and typical Wall Street schemes suggest a monumental bear market is more likely.
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While we have always maintained a contrarian approach to the general stance on Bitcoin ETFs, which many claim will usher in trillions of new inflows and be all accepted by SEC, we recognize the benefit of examining both sides. By doing so, you can develop a strategy that is low-risk and high-reward, and aim for maximized returns during this cycle.
Let's assume for a moment that the media and their unnamed "sources" are correct, and that the Bitcoin Spot ETFs will be approved either tomorrow by the SEC or sometime next week.
There are few, if any, indicators suggesting that this would positively impact Bitcoin. In fact, based on many other factors we will mention later and how this market reacts to viciously to news events, it is more likely to trigger a massive crash. Virtually none of the analysts, who have been closely following the ETF story, have also noted such a positive effect, likely due to their own private concerns.
Earlier today, Grayscale, Ark Investments, Valkyrie, and VanEck became the latest firms to file their Form 8-A’s, which admittedly strongly signals progress towards a potential spot bitcoin exchange-traded fund.
100% of Foreign Bitcoin Spot ETFs Failed
To determine how a Spot ETF would perform, it’s best to avoid the speculation from maximalists and Bitcoin fanatics, who will obviously say good things in order to lure more investors, but rather focus on other examples.
I spent lots of time researching other ETF approvals for Bitcoin, and could not find a single one that performs well. To start, The Jacobi Bitcoin ETF, launched in Europe, has experienced an unexpectedly tepid response.
Since November 2nd, almost no one has engaged with the fund. With a total trading volume of just $1.7 million since its inception, the ETF's performance can be described as lackluster at best. There are 750 million Europeans that have access to this Spot ETF, and only 1 person has traded it within the last 2 months. Ouch!
Additionally, Canada has had five Bitcoin spot ETFs for over two years now. Launched in 2021, the market has since faced a significant drop afterwards, which we will discuss later on as well. They were once the main narrative that Bitcoiners used, but as soon as they saw the failing demand, it was never mentioned again.
This situation raises important questions about the potential reception of a Bitcoin ETF in the U.S. market. If Bitcoin Spot ETFs have failed in every other country where they were approved, why would they magically succeed in the U.S.? Yes, BlackRock and Fidelity are much larger firms and have way more clients, but even multiplying the volume of existing European ETFs by x100 or x1000 would by minimal. Considering that much of this rally was spurred by rumors of it triggering huge demand, investors are likely to be very disappointed when faced with the reality of low demand.
Once this realization sets in, and with no more active narratives to drive price increases, we are going to witness an enormous sell-off, as is often the case. The reason this crash will be historic, is because this false idea of “institutional adoption” which is non-existent, is the single-largest narrative that has been pushed by Bitcoiners. Once this passes, there is no repeating it. No other narrative can live up to this one, unless they start claiming things like the U.S government is adopting it.
Mirroring 2017 and 2021 Peaks.
One thing that often isn’t talked about is how this story closely mirrors the events at the peak of the Bitcoin market cycle in December 2017 and October 2021.
In 2021, we saw very similar headlines to what we’ve been seeing now. Valkyrie, ProShares, VanEck, and others filed Form 8-A with the SEC, which, as mentioned, is a key form signalling imminent approval. This represented one of the final stages in the application process.
The BTC Futures then officially launched on Nasdaq in late October, and just under two weeks later, the Bitcoin market reached its peak, marking the start of its longest bear market in history as it plummeted from $65,000 to under $16,000.
The Bitcoin Futures ETFs were touted as a massive bull trigger, but in reality, they were what popped the bubble. It was a typical "sell-the-news" event, where hype inflated the bubble, but once there were no new narratives to inject fresh money into the market, things began to dry up, leading to a plunge.
This isn't the first time that these Wall Street products have resulted in a massive drop. The launch of the first-ever Bitcoin Futures in December 2017 also "coincidentally" marked the exact peak of the market.
While many current Bitcoin investors weren’t around in 2017 and unaware how things were, I was, and can tell you that it mirrors this almost identically. Everyone was going all-in at the top, FOMO was at its peak, and everyone was talking about how this event was insanely bullish and would push prices to 1 million or higher.
The day they launched was the day Bitcoin hit its all-time highs, and from there, it was a downward trend for the next year, with prices plummeting from over $18,000 to under $3,000. Pretty much the opposite of what everyone on CT predicted.
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