Bitcoin Flash Crash, Report Says ETFs will be Denied

Bitcoin crashed by 7% on Wednesday after a Matrixport report said it expects the SEC to reject all ETFs applications next week.

Bitcoin slid 7% on Wednesday as doubt about the approval of a spot Bitcon (BTC) ETF spread like wildfire. The crash reversed the gains from the surprising move upwards from January 1, causing the liquidation of $500 million in leveraged positions.

The report from Matrixport stated “Despite the widespread anticipation of SEC approval, our contrarian stance asserts that all proposals must catch up to a crucial requirement, possibly leading to rejection for ALL Bitcoin Spot ETF applicants in January.”

However, when pushed for more information on his sourcing, the author of the report, Markus Thielen, admitted via X, that it was simply his opinion, and not based on new information.

Alex Thorn, Head of Galaxy, read the report by Thielen, and noted that it made some poor assumptions.

Thorn said there were three confusing and questionable claims:

1. That the bull run was kicked off by Franklin Templeton’s September ETF filing. They write: “There was now more than one big traditional finance asset manager applying for an ETF.” No mention of the fact that Invesco, Wisdomtree, Vaneck, Fidelity, and Ark had all already filed and all have more ETF AUM than Franklin templeton. The bull run was not set off by their filing in Sept. – the run really started after the false Cointelegraph tweet and then the gamma squeeze in mid-late Oct.
2. That all ETF applications still lack a critical requirement. here they are referring to the fact that the issuers all have surveillance-sharing agreements with Coinbase but “Coinbase is only 11% of the spot market.” They missed the DC Circuit Court of Appeals ruling which negated this question, which first of all said that surveilling futures markets was sufficient because futures and spot prices were “mathematically indistinguishable. (other commodity ETFs also survey futures.) matrixport also says the SEC is suing coinbase so they are a bad choice — future ETF applications should also include, they write, “Kraken, OKX, ByBit.” The SEC is also suing Kraken, and the idea that these would be good but for the omission of OKX and ByBit is strange.
3. That the SEC commissioners would vote to reject even if the staff recommends. “why would something suddenly start working (or being approved) if it hasn’t worked in 10 years?” I won’t speculate about individual commissioners, but there’s not a real argument here. We all know “why” – because the market has meaningfully changed: the issuers are serious and seasoned, the market infrastructure has matured significantly, and the courts have weighed in.

Thorn finished, stating that, “it’s impossible to know the future, and certainly anything could happen. But this prediction from Matrixport is a real head-scratcher.

The good news is – we should get a decision from the SEC, positive or negative, by the end of next week. Our view is that it will be positive.