The cryptocurrency community is abuzz with the growing anticipation of the potential approval of spot Bitcoin exchange-traded funds (ETFs) in the United States. However, Cathie Wood, the CEO of ARK Invest, offers a nuanced view on how this could affect Bitcoin's price in the short term, hinting at a possible sell-off following the news.
A Short-Term Dip on the Horizon?
Cathie Wood, the founder, CEO, and chief investment officer of ARK Invest, suggests that the approval of a spot Bitcoin ETF might initially lead to a drop in BTC prices. In her interview with Yahoo Finance on December 26, Wood explained that this phenomenon could occur as some investors might choose to "sell on the news."
She elaborated, “Those who have been moving in and enjoying some nice profits will probably ‘sell on the news.’ That’s an expression that traders use, so you anticipate the event, beat up the price, and then sell on the news”.This perspective sheds light on the common market behavior where investors cash in on the buildup to a significant event. The "big anticipatory move" surrounding the potential ETF approval has been a focal point for many traders, possibly inflating Bitcoin's price temporarily.
Long-Term Gains More Significant
Despite the potential short-term fluctuations, Wood remains optimistic about the long-term implications of a spot Bitcoin ETF. She believes that such an ETF, once approved, would offer a straightforward way for institutional investors to access Bitcoin.
This accessibility could lead to significant capital inflow into Bitcoin, as institutions allocate a fraction of their trillions of dollars in assets to the cryptocurrency. Wood posits that even a minimal allocation of 0.1% or 0.2% by institutional investors could lead to substantial price movements for Bitcoin, given its capped supply of 21 million coins.
This long-term perspective underlines the transformative potential of the ETF for Bitcoin's market.
A Positive Outlook from the SEC
The dialogue between ARK Invest and the Securities and Exchange Commission (SEC) regarding the spot Bitcoin ETF has reportedly been constructive.
Wood notes a shift in the SEC's approach, moving from silent denials to engaging in “thoughtful, detailed, technical questions”.This change, according to Wood, signals a brighter outlook for the approval of the first spot Bitcoin ETFs, potentially as soon as January 10.