Recently, one of the focuses of the global cryptocurrency market is the upcoming ruling by the U.S. Securities and Exchange Commission (SEC) on the application for approval of a Bitcoin exchange-traded fund (ETF). This ruling has brought great uncertainty to the price trend of Bitcoin.

First of all, if the SEC approves the application for a Bitcoin ETF, it will mean that institutional investors can participate in the Bitcoin market in a more convenient way. Since institutional investors usually have greater capital strength, they may bring a large amount of funds into the Bitcoin market, thereby driving up the price of Bitcoin.

Bitcoin has risen more than 150% in 2023, and this momentum has captured the hearts of Wall Street, leading to a rush among Wall Street firms to launch the first-ever Bitcoin spot ETF (exchange-traded fund).

On Tuesday, well-known Crypto asset analyst Mike Alfred published an exchange on X (original Twitter) asserting that the probability of a spot BTC ETF being approved before January 10 is as high as 98.7%, thus arousing excitement in the Crypto asset community.

Alfred said: “There is a 98.7% chance that a spot BTC ETF will be approved before January 10th.”

He also added: “Many BTC miners’ January call options have been trading like there is no expectation for the next month other than normal volatility. How can Wall Street be so indifferent on this issue?”

The tweet received widespread approval, including from pro-XRP attorney John E. Deaton, who responded enthusiastically to Alfred, expressing his agreement.

Notably, John E. Deaton, who was recognized for representing more than 75,000 XRP investors in the SEC v. Ripple Inc. case, had predicted in October that a spot BTC ETF would receive decisive approval by the end of this year or at the latest by the end of the first quarter of 2024.

Amid rising optimism in the crypto asset space, discussions and revised proposals are underway by some major companies seeking approval for spot BTC ETFs in the United States.

On Monday, BlackRock, the world’s largest asset manager, submitted an updated proposal for its ETFs that incorporates the cash creation and redemption mechanisms favored by the SEC.

Initial proposals from different applicants were closely scrutinized by the SEC, raising concerns about investor safety and market manipulation.

Notably, the SEC has been actively engaging with several ETF applicants recently, holding multiple meetings with firms including Grayscale Investments, Fidelity Investments, and Franklin Templeton.

That being said, market speculation continues, with Bloomberg recently predicting that there is a 90% chance that the SEC will approve a spot BTC ETF by January 10.

Now, all eyes are on the U.S. Securities and Exchange Commission’s (SEC) upcoming decision on January 10 regarding the approval or rejection of a spot Bitcoin ETF.

Based on historical experience, this ruling will have a significant impact on the price of Bitcoin.

Potential for price increases

Supporters of a Bitcoin ETF believe that approval by the SEC would open the door to massive institutional and retail investment, pushing the price of Bitcoin to new heights.

History provides a glimpse into how expectations surrounding ETFs can affect the price of Bitcoin.

In 2017, bitcoin prices surged to more than $1,400, fueled in part by expectations for the first bitcoin ETF. That was up from lows of $600 the previous year.

At the time, investors believed that the launch of a Bitcoin ETF would make it easier for institutional funds to enter the market, triggering a buying frenzy. However, the U.S. Securities and Exchange Commission ultimately rejected the proposal, causing a sharp drop in Bitcoin prices.

Within days, the price of Bitcoin was back below $1,000.

Eventually, however, the arrival of CME Bitcoin futures attracted new attention in 2017, with the market price soaring to over $20,000 that year.

Fast forward to 2021, and Bitcoin has once again rallied to new all-time highs above $60,000.

The rally was driven in part by the successful launch of bitcoin futures ETFs in Canada and Europe, which allow investors to gain exposure to bitcoin without directly holding the cryptocurrency, while expectations of similar products in the U.S. drove bullish sentiment.

Secondly, the approval of a Bitcoin ETF also means that Bitcoin will be further recognized by regulators and enhance its legitimacy and credibility. This positive recognition is expected to attract more traditional investors to enter the market, increase the demand for Bitcoin, and further drive up prices.

It is important to note that if the SEC ultimately rejects the Bitcoin ETF application, it will have an adverse impact on the Bitcoin market. Although this may only be temporary, market sentiment may be negatively affected, leading to a short-term drop in prices.

Finally, after false news of an ETF approval broke earlier in 2023, the price of Bitcoin rose by thousands of dollars in a matter of minutes, a move that suggests there could be upside following Bitcoin ETF approval.

Possibility of price drop

On the other hand, there is a view that the approval of a Bitcoin ETF could lead to a price adjustment.

Some market experts worry that ETFs could become targets of short sellers, leading to increased volatility, or that ETFs could become a “sell the news event.”

Second, the approval of a Bitcoin ETF could bring greater regulatory scrutiny to the entire cryptocurrency market. This increased regulation could lead to increased taxes, reporting requirements, and potential restrictions on Bitcoin usage, which could dampen investor enthusiasm.

Additionally, some believe that the market may have already priced in the potential approval of a Bitcoin ETF, and any rejection could lead to market disappointment and sell-offs, similar to what happened in 2017 when the Winklevoss Bitcoin ETF was rejected.

The crypto community eagerly awaits the SEC’s final decision, but it must be remembered that it is just one of many factors that influence the price of Bitcoin.

Market sentiment, macroeconomic conditions, and geopolitical events will also play a role in influencing token prices.

In general, the US SEC's Bitcoin ETF ruling has a significant impact on Bitcoin prices. Approval will inject more funds and confidence into the Bitcoin market, driving up prices; rejection may lead to short-term adjustments. However, regardless of the outcome of the ruling, Bitcoin, as a global digital asset, should not only depend on whether the ETF is approved, but should take into account a variety of factors.