The hopes of a bitcoin ETF being approved in the United States have risen recently after the U.S. Securities and Exchange Commission (SEC) chair Gary Gensler suggested he would be open to permitting futures-based bitcoin exchange-traded funds.
As the crypto community awaits the SEC’s decision on crypto ETF applications this month, the launch of such a product would not bode well with the price of the dormant cryptocurrency in the short term. That’s the opinion of Dan Morehead, the CEO of Pantera Capital.
The Bear Market Is Over
In an October 6 newsletter, Morehead observed that we are now firmly in a bull market after a short period of mayhem that entailed fears that China banning cryptocurrency transactions and mining would ruin the industry and fierce arguments on the carbon footprint of proof-of-work cryptocurrencies like bitcoin.
Bitcoin has been on a roll since the beginning of this month. The OG cryptocurrency is currently changing hands at $56,421.34 — just a few thousands shy of the April $65,000 historic high, and some pundits foresee more gains for bitcoin in the fourth quarter of the year.
Morehead, however, believes the potential launch of a bitcoin ETF could stop the rally dead in its tracks. A Bitcoin ETF would track the price of the asset, giving institutional investors BTC exposure without necessarily having to physically hold the cryptocurrency.
Dan Morehead: ETF Could Hurt Bitcoin’s Bull Run
For years, crypto advocates have anticipated the approval of a bitcoin ETF by the SEC due to the lack of regulated alternatives for institutional investors. The regulator has rejected all ETF proposals so far on the grounds that there were not enough investor protections in place. Most onlookers harbor the belief that the launch of a Bitcoin ETF would drive the crypto asset’s price higher.
Yet, Pantera’s Morehead says it would be a “buy the rumor, sell the fact” kind of situation, citing two major crypto events in the past that both resulted in a market downturn despite starting out with optimistic expectations.
The first event was after Chicago Mercantile Exchange unveiled bitcoin futures back in Dec. 2017. At the time, investors were hopeful that the listing of bitcoin futures on CME would send the cryptocurrency to the moon. In truth, bitcoin bulls were fired up. “The markets did rally 2,440% until **the very day** futures listed. That was the top. One of those -83% bear markets started that day,” Morehead wrote.
This gloomy trend was repeated again this year as Coinbase got listed on Nasdaq. BTC rallied circa 822% in the day leading to the debut on the stock market before peaking at $64,863 and a -53% bear market commencing.
That said, Morehead proposes a similar scenario could be witnessed if the SEC approves a Bitcoin ETF. “Will someone please remind [me] the day before the bitcoin ETF officially launches? I might want to take some chips off the table,” the hedge fund manager postulated.
Morehead Still Remains Positive On Long-Term Trend Of Bitcoin
While Morehead believes we won’t enjoy a 100x-in-a-year upsurge again, he upholds a long-term bullish outlook for the benchmark cryptocurrency.
“While we’ve had two down 83% bear markets already, I believe those are a thing of our primordial past. Future bear markets will be shallower. The previous two have been -61% and -54%,” he summarized.