Economist Alex Krüger Flags Risks Post Spot Bitcoin ETF Approval

Renowned economist Alex Krüger is warning Bitcoin (BTC) investors that the cryptocurrency may see a decline once an exchange-traded fund (ETF) for the spot market is expected to be approved.

Speaking to his substantial fan base on the social networking site X, Krüger shares his opinions about the possible effects on the market should the Securities and Exchange Commission (SEC) of the United States approve BTC exchange-traded funds (ETFs) for the spot market. According to him, the permission may set off a sell-the-news scenario in which the value of Bitcoin would spike right away around the anticipated approval date in January. This surge, nevertheless, could not last long since profit-taking actions could ensue.

Bitcoin ETF Base Case Scenario

Krüger outlines the potential scenario for Bitcoin ETF approval:

1. Approval Timeline: Expected between January 8th and January 10th.
2. Immediate Reaction: Initial increase post-approval (due to it being approximately 90% priced in).
3. Follow-up: Subsequent decline below pre-approval levels in the lead-up to the launch, around two weeks later. This downturn is attributed to the current heated market conditions, with altcoins showing funding rates between 20-60%, and Bitcoin’s March futures annualized basis ranging from 17-20%.

The economist highlights that although there isn’t a specific launch date, it may happen soon after approval or later. An early debut appears more likely, considering the quantity of ETFs vying for market share.

Strong inflows and trading volume after the ETF’s introduction, according to Krüger, may support an upward trend in the price of bitcoin. He does, however, highlight the possible dangers, saying that poor inflows or rejected ETF bids can cause the main digital asset’s value to drop sharply.

Krüger includes a caution in which he tells traders to be on guard and to establish alarms for January, particularly in the vicinity of anticipated ETF approval. He emphasizes how crucial it is to keep an eye on market dynamics, particularly the intensity of post-launch inflows, as they may have an impact on how far Bitcoin’s price may rise.

Finally, even though Alex Krüger is excited with the approval of a Bitcoin spot market ETF, he advises traders to exercise prudence and strategic awareness. The possibility of a sell-off following approval highlights how sensitive market responses may be and how crucial it is to keep up with developments in the ever-changing world of cryptocurrencies.