According to the latest K33 Research report, approval for a spot Bitcoin ETF appears to have been “confirmed” in January, with an application update indicating that submitters have agreed to set up cash generation ahead of the January 10 deadline.
Yesterday, BlackRock filed a revised S-1 filing with the Securities and Exchange Commission that includes a new cash redemption model that other analysts believe the SEC favors. However, there is room for an ‘in-kind’ process, subject to regulatory approval.
BlackRock will likely want an in-kind redemption model that gives asset managers greater flexibility in managing their portfolios. However, the SEC reportedly favors a cash model that would require BlackRock to take Bitcoin out of storage, sell it immediately, and then return the cash to investors if they want to redeem their shares.
“Although it is not the most efficient structure for cash generation, the filer’s update is a further signal favoring ETF approval in the next three weeks,” said K33 senior analyst Vetle Lunde and vice president Anders Helseth.
In an interview with The Block’s Frank Chaparro on The Scoop podcast, Bloomberg Intelligence ETF research analyst James Seyffart reiterated that the approval window for a potential spot Bitcoin ETF is likely to fall between January 8 and January 10. He has since proposed. There is a 90% chance of approval by January 10th. The Ark 21Shares application, first submitted last April, is now approaching its final deadline.
Bitcoin scope amid ‘altcoin euphoria’
while Bitcoin BTC
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ETH remains stuck in a trading range between $40,500 and $43,500, Ether continues to underperform, and Memecoin and alternative layer 1 tokens are showing “euphoria,” Lunde and Helseth said.
Top 3 market capitalization performers. Image: K33 Research.
Bitcoin spot volumes remain high, which means the recent rally is likely to attract new buyers and motivate others to take profits, leading to price consolidation, analysts noted. However, outstanding interest in Bitcoin criminals among cryptocurrency derivatives traders has fallen to a yearly low and there are no signs of a retail bubble in the asset, they said.
Meanwhile, data from institutional traders at the Chicago Mercantile Exchange shows that traders there are maintaining bullish exposure ahead of the spot Bitcoin ETF decision. December maturities are currently trading at an annualized premium of 17%, up from 12% the previous week.
CME Premium. Image: K33 Research.
However, Lunde and Helseth anticipate significant displacement from CME futures-based ETFs once the spot Bitcoin ETF is approved. Combined with a profit-taking strategy, this could reduce CME’s market power going forward and lead to a potential 50% reduction in open interest, they said.
In contrast, spirits appear to be attracted to a handful of altcoins, which have seen a “leverage frenzy” with open interest and prices soaring over the past week, analysts said. As a result, altcoins’ share of total OI in cryptocurrency derivatives increased from 11% to 19%.
Ratio of altcoins to total OI (excluding ETH). Image: K33 Research.
Much of this growth has been concentrated in tokens that have seen the biggest price gains over the past month, such as BRC-20 token ORDI, Solana-based memecoin BONK, and new layer 1 Celestia’s TIA. ORDI’s open interest to market capitalization ratio soared to 24%, more than 10 times the ratio of Bitcoin, and its funding ratio suggests that both buyers and sellers were keen to trade the volatility.
Lunde and Helseth argued that isolated leverage in other crypto assets could also be positive for Bitcoin and keep Bitcoin in a healthier leveraged state. Altcoins are less exposed to liquidation cascades because they act as a “pressure valve for thrill seekers.”
Open Interest for Circulating Supply. Image: K33 Research.
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