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Market Lab Report - Bitcoin spot ETF

Many indications and odds show the long awaited Bitcoin spot ETF will be green lighted by the SEC this week. The SEC has been in close touch with applicants and recently tweeted a warning about managing risk and being aware of scams when it comes to cryptocurrencies. This tweet seemed indicative that the SEC is firing its last warning shot before it goes ahead and approves the ETF. That said, even if the SEC delays once more, the likelihood of a spot ETF being approve sometime this quarter is near certainty, so any selloffs in Bitcoin as a result should be considered buying opportunities. 

The Bitcoin spot ETF will enable much greater retail and institutional liquidity. Think of it like a special type of club that lets you buy a piece of Bitcoin without having to actually own the Bitcoin itself. Once launched, a couple of billion dollars will likely flow into Bitcoin within the first 48 hours. Roughly $100 billion will likely flow into the ETF in the coming weeks. When taking into account that approximately 70% of all bitcoin in circulation has not moved in over a year, this $100 billion will flow into a liquid Bitcoin market cap of about $255 billion. This will therefore likely push the price higher by about 40%. 

Blackrock and Grayscale among others will spend $100+ million on advertising. There are already Bitcoin commercials that hit mainstream platforms. Financial advisors might start telling people to a small portion of their money into Bitcoin. Ethereum's spot ETF will follow as some are betting on its launch sometime in the first half of this year. 

Further, the Bitcoin halving in early Q2 of 2024 will reduce the amount of incoming bitcoin to the circulating supply from 900 to 450 per day. So increasing demand from the ETF combined with decreasing incoming supply from the halving should increase buying pressure by diminishing supply.  

Nevertheless, some are betting the launch of the ETF will be a sell the news event. Short term, Bitcoin is likely to trade in volatile fashion in both directions. Due to this possibility, if you plan to hold this portion of Bitcoin long term, it might not be a bad idea to buy a small amount of Bitcoin once a day (or once a week) so you dollar cost average during this period of short-term unpredictability. 

Over the long run, since most of our audience trades, using a major moving average such as the 50dma (and shorter moving averages for smaller coins) to capture the meat of the move when Bitcoin undergoes a major trend can work well. If you trade on a shorter term basis, shorter moving averages are more apt. 

A spot Bitcoin ETF is certainly a bullish event in the coming months and years. This year's Bitcoin halving adds further fuel as well as ongoing liquidity in the form of stealth QE. Reverse repos run out in mid-March followed by the Fed meeting where they will likely figure out a way to replenish the QE firehose.

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