Spot Bitcoin ETF approval has a 75% chance of a “sell-the-news” event, according to K33 Research

Approval of the first spot Bitcoin ETF is only about a week away, and BlackRock and other major players are pushing for it. While Bitcoin price made a strong rise above $450,000 earlier this week, there is a heated debate in the crypto community that the ETF approval could be a sell-off.

Selling pressure after Bitcoin ETF approval?

K33 Research predicts a decision on Bitcoin spot ETFs between January 8th and 10th, with the possibility of market-moving news emerging sooner. Senior analyst Vetle Lunde believes the approvals are likely to trigger a sell-the-news event regardless of timing.

Lunde points out that traders appear to be at clear risk ahead of the ruling, with derivatives showing significant premiums following Bitcoin's sustained bullish momentum over the past three months. According to Lunde, the sell-the-news scenario could become a self-fulfilling prophecy as many short-term market participants wait for the event to take profits.

Lunde assigns a 75% probability to the sell-the-news scenario, a 20% probability of approval, and a 5% probability of ETF rejection, even with recent positive signals from meetings and updated S-1s prospectuses with the Securities and Exchange Commission.

Excessive foam in the market

The analyst pointed to signs of market turmoil, pointing to a rise in futures premiums on the Chicago Mercantile Exchange, which reached levels of 50% on an annual basis. Institutional participants increased their long-term commitment in anticipation of approval. The premium represents the difference between the spot price and the forward price of an asset.

Open interest has grown by over 50,000 BTC in the past three months, likely due to anticipation of spot Bitcoin ETF approvals. “At current premiums, maintaining CME engagement incurs a rolling cost of 1-2% each month – an acceptable cost for medium-term vesting before a pivotal event, but unsustainable in the long term, particularly as cheaper engagement alternatives emerge ,” he said.

On the retail side, financing rates on offshore exchanges have reached extreme levels, reaching an annual high of 72% during the recent Bitcoin overnight rally. He added:

“Short positions are hesitant to enter the market with the ETF verdict just a week away, increasing offender premiums in the spot market and making long positions expensive to maintain.” The aggressive leverage of long positions could be declining the ETF ruling will fuel the market for a long squeeze.”

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