U.S. Congress and SEC put “Bitcoin on the spot” over ETFs- How?

• The Congress asked for immediate approval while the SEC delayed its decision.
• Bitcoin could drop as low as $24,800 due to potential sell offs.

Some members of the U.S. Congress have rallied behind parties pushing for Bitcoin [BTC] spot ETFs. In a joint statement released on 26 September, lawmakers Mike Flood, Wiley Nickel, Tom Emmer, and Ritchie Torres asked the SEC to approve the applications without any delay.

Read Bitcoin’s [BTC] Price Prediction 2023-2024

Bitcoin gets legislative support as…

According to the letter which was directed to SEC chair Gary Gensler, the congressional members mentioned that the regulator should show that it was not discriminating against the spot Bitcoin products. 

While quoting the law, and referring to the Grayscale vs. SEC case, the lawmakers noted that the SEC was currently violating the judgment by not approving the Bitcoin ETF applications on its table.  For the members involved, the approval of the ETFs and subsequent regulation makes room for investor protection. The statement told Gensler that, 

“A regulated spot Bitcoin ETP would provide increased protection for investors by making access to Bitcoin safer and more transparent. To that end, we urge you to approve the listing of spot-Bitcoin ETPs immediately.”

Following the public disclosure of the letter, Bitcoin’s social dominance jumped to 20.79%. Social dominance shows the share of discussion referring to a particular asset. Therefore, the hike meant that conversations around Bitcoin and topics around it quickly spread like wildfire because of the development.

However, social dominance was not the only metric with a change. As of 25 September, Bitcoin’s weighted sentiment was -0.079. After the development, the metric jumped into the positive region. At press time, the weighted sentiment was 0.074.

The weighted sentiment of an asset describes the positive or negative perception market participants have. This value is derived from the average negative or positive comments around the cryptocurrency involved. Thus, the climb into the positive area suggests that there were more positive comments about BTC than negative ones.

Source: Santiment

SEC counterattack, says “it’s not yet time”

Unfortunately, the euphoria around the Congress’ involvement did not last long. This was because the SEC also released a statement of its own. According to the commission, the applications sent by ARK Invest and 21Shares may be delayed one more time.

While citing section 19(b) of the Securities Act, the SEC explained it had the power to postpone the approval to 10 January, 2024. It said, 

“The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change, as modified by Amendment No. 3.”

Reacting to the SEC decision, James Seyffart noted that 21Shares and ARK Invest may not be the only firms that would be affected. He noted that others like Fidelity VanEck, and BlackRock could also face a similar situation.

This may put the hammer down for any hopes of an ETF approval this year? If they went on Ark/21 shares already, we may see delays on all the other filings today too? BlackRock, Bitwise, VanEck, Invesco, Wisdomtree, Fidelity & Valkyrie a all due in mid Oct … pic.twitter.com/XiFbxIrIRK

— James Seyffart (@JSeyff) September 26, 2023

Meanwhile, Bitcoin’s price seemed largely unaffected by the back and forth of the SEC and U.S. Congress. At press time, the king coin exchanged hands at $26,249.

However, BTC could be on the verge of another correction, based on an analysis put out by on-chain analyst Tarekonchain.

To arrive at the conclusion, Tarekonchain considered the exchange reserves, the Coin Days Destroyed (CDD), and Spent Output Age Bands. The CDD looks at the period a cryptocurrency stayed dormant before it was moved.

When the metric is high, it means that long-held coins are moving in great amounts, and holders may be exposed to selling. When the CDD is low, it means that the long-held coins are slowing down movement.

BTC’s next direction is down still

According to the chart shared by the analyst on CryptoQuant, the seven-day exchange inflow CDD had increased. Thus, there is a high chance that the sell-offs could end up in a BTC correction.

Source: CryptoQuant

For the Bitcoin Spent Output Age Bands (SOAB), Tarekonchain noted that the 12-18 months Bitcoin bands also had the potential to sell. The SAOB is a metric that bundles spent coins into categories while identifying periods of on-chain transactions influenced by HODLers or new market participants.

In concluding on the state of this metric, Tarkeonchain noted that,

“Bitcoin aged 12-18 months is entering the market, potentially indicating sales. However, Bitcoin held for 6-12 months is mostly being held, indicating continued confidence in the long-term prospects of Bitcoin.”

Lastly, the analyst also looked at the spot exchange netflow and exchange reserves. Typically, high values in the reserve indicate high selling pressure, and low values indicate otherwise.

At the time of writing, the Bitcoin exchange reserve spiked. This suggests increased trading activity on the exchanges and possible upcoming sales.

Source: CryptoQuant

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This increase suggests increased trading activity on the exchanges and possible upcoming sales. Tarekonchain further concluded that Bitcoin had the tendency to drop below $25,000. He wrote,

“The Bitcoin market is experiencing mixed activity, with both short-term and long-term investors participating. While we may see minor price fluctuations, there’s no conclusive evidence at this time to suggest a break below the support zone of $25,200-$24,800.”