Bitcoin Plunges 7% as Matrixport Report Sparks Market Panic

It was a tumultuous Wednesday morning for Bitcoin as the cryptocurrency experienced a significant plunge of 7%. At its lowest point, Bitcoin sank to $41,804.95 before making a slight recovery. Currently, BTC is trading at $43,287.67, according to CoinGecko. The catalyst behind this sudden drop appears to be a report from Matrixport, a digital asset manager. The report, titled "Why the SEC will REJECT Bitcoin Spot ETFs again," was written by Matrixport's Head of Research, Markus Thielen, and was also featured on the 10x Research blog. Decrypt reached out to Matrixport and Thielen for comment but has yet to receive a response.

Matrixport's report suggests that despite frequent meetings between ETF applicants and SEC staff, all applications fall short of a critical requirement necessary for approval. The company anticipates that this requirement may be met by Q2 2024, but they expect the SEC to reject all proposals in January. This revelation has caused market panic, particularly due to the assertion that none of the ETF applications will receive approval in January. Furthermore, Matrixport estimates that approximately $14 billion in cash has entered the crypto markets as a result of the Bitcoin ETF hype. Consequently, many traders who were long on Bitcoin have been liquidated.

In the past day alone, $576 million worth of long positions were liquidated, with $553 million of it occurring within the last 12 hours. This significant liquidation can be attributed to the bearish report released by Matrixport, which was published around 5 a.m. Eastern Time, approximately seven hours ago. Vetle Lunde, a senior analyst at K33 Research, concurs that the Matrixport research appears to have been the catalyst for the market downturn. Lunde notes that leverage in the market was already quite high prior to the crash, with longs being the primary aggressors, as evidenced by funding rates and futures premiums pushing to annualized rates above...