A major crypto hedge-fund manager expects bitcoin to tumble once the SEC greenlights a bitcoin-backed ETF—Here’s why

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Crypto successful a snap

Bitcoin BTCUSD, +2.46% has seen a momentous emergence this week, up 12.7% from past week arsenic of Friday, FactSet information show. By Wednesday, the cryptocurrency recorded a seven-day summation of 33.5%, its champion seven-day show since February this year, according to our probe squad astatine Dow Jones Market Data.

Ethereum ETHUSD, +0.69% besides recorded a 9.7% play summation arsenic of Friday, portion dogecoin DOGEUSD, -1.86% roseate 13% implicit the week.

Crypto Metrics

A bitcoin-futures bounce?

The 4th fourth has historically been bully for bitcoin. In the 4th fourth of 2020, bitcoin rallied astir 170% from astir $10,780 to $28,980, according to CoinDesk data.  

Entering October this year, bitcoin besides has seen a bully start, arsenic the cryptocurrency connected Wednesday rose supra $55,000, the archetypal clip since May.  

Traders and analysts attributed the rally partially to organization inflows, arsenic established players expect the SEC to o.k. the archetypal bitcoin futures exchange-traded funds successful the coming weeks.

SEC Chairman Gary Gensler precocious reiterated his support for a bitcoin-backed futures ETF, which would put successful bitcoin-based futures contracts alternatively of the crypto itself. The SEC hasn’t yet approved immoderate bitcoin-backed ETFs oregon those underpinned by bitcoin derivatives.

Bitcoin futures contracts astatine CME Group CME, -0.29% were trading astatine a premium of up to 17% to the spot terms connected Wednesday, the highest since April, erstwhile bitcoin reached its all-time high, according to information analytics instrumentality Skew. The metric usually reflects organization flows, arsenic CME is the preferred avenue for institutions’ vulnerability to bitcoin.

“The unusually ample premium indicates an overwhelming magnitude of outright buying,” crypto trading steadfast QCP Capital wrote connected Telegram connected Thursday. 

Liquidation of leveraged abbreviated positions besides fueled bitcoin’s caller terms rally, analysts said. Leveraged abbreviated positions are erstwhile traders stake the terms of an plus volition diminution utilizing borrowed funds.

“​​The setup for a abbreviated compression had been primed this week arsenic bears shorted $50K resistance,” NYDIG, a fiscal work steadfast that focuses connected bitcoin, wrote successful a study connected Wednesday. 

Déjà vu Q4 2020?

Some analysts expect the emergence to beryllium sustained. Anto Paroian, main operating serviceman astatine crypto hedge money ARK36, said the uptrend this week is antithetic from the 1 a period ago, erstwhile bitcoin surpassed $50,000. “There wasn’t capable spot successful the markets to prolong a further rally,” Paroian told MarketWatch via email.

“Now, aft consolidating for a agelong clip successful the $40K range, Bitcoin seems overmuch amended prepared for different large determination upwards,” Paroian wrote. “If that happens, Bitcoin volition apt spell connected to trial its ATH (all-time high) and there’s a precocious probability it volition interruption it.”

However, immoderate stay wary that the crypto marketplace could spot different plaything little akin to the 4th fourth of 2020.

Dan Morehead, CEO of plus manager Pantera Capital, warned that the “buy the rumor, merchantability the news” signifier whitethorn use if the SEC approves a bitcoin-backed futures ETF. 

“Will idiosyncratic delight punctual [me] the time earlier the bitcoin ETF officially launches? I mightiness privation to instrumentality immoderate chips disconnected the table,” Morehead wrote successful a report.

About a twelvemonth earlier CME listed bitcoin futures successful December 2017, bitcoin roseate by 2,440%. The cryptocurrency rallied 822% successful the 12 months up of crypto speech Coinbase COIN, -1.37% ‘s nonstop listing astatine Nasdaq. However, the marketplace turned downward aft some events, Morehead noted successful the report.

Meanwhile, arsenic the crypto marketplace becomes broader, much institutional, terms swings should moderate, Morehead speculates.

Crypto brief 

Bloomberg Businessweek published a screen story this week astir the enigma astir the $69 cardinal assets of Tether, the world’s largest stablecoin issuer. With exponential maturation successful caller years, Tether has drawn expanding scrutiny from the regulators and immoderate investors. Its stablecoin USDT is pegged 1:1 to the U.S. dollars.

Tether has invested immoderate of its reserves successful Chinese commercialized paper, and it was earlier the caller woes of Chinese real-estate developer Evergrande, according to Bloomberg, citing a papers that elaborate Tether’s reserves. 

A Tether typical didn’t reply the question if Tether has held immoderate Chinese commercialized paper, but wrote done email that USDT is ever backed by reserves including cash, currency equivalents, different short-term deposits and commercialized paper.

Bloomberg besides reported that Tether has made billions of dollars of crypto-backed loans, with 1 to crypto lending level Celsius Network Ltd.

The Tether typical wrote to MarketWatch that “we person a select, tiny radical of customers that get USDTs successful speech for posting security. These loans are secured by collateral successful Tether’s possession of good successful excess of 100% of the indebtedness proceeds and gain monthly involvement for Tether.”

A legume container for Bankman-Fried?

Sam Bankman-Fried, laminitis and CEO of crypto speech FTX, is the richest idiosyncratic nether 30 successful the world, according to Forbes. Thanks to the crypto boom, Bankman-Fried is present worthy $22.5 billion, up from $8.7 cardinal successful April.

The 29-year-old self-made billionaire is known for sleeping successful legume bags successful the bureau for astir nights. “One broadside vantage of the legume bags: if I slumber successful the office, my caput stays successful enactment mode, and I don’t person to reload everything the adjacent day,” Bankman-Fried erstwhile wrote connected Twitter. 

It seems that the wont has besides been adopted by Ryan Salame, who was named CEO of FTX’s recently launched subsidiary FTX Digital Markets successful the Bahamas. FTX besides moved its office from Hong Kong to the Bahamas, wherever the regulatory situation is much crypto-friendly. 

Coin quotables

Dawn Fitzpatrick, CEO and main concern serviceman of Soros Fund Management, said the household bureau founded by billionaire capitalist George Soros, owns immoderate bitcoins. 

“We ain immoderate coins, but not a lot,” Fitzpatrick said successful an interview astatine a Bloomberg lawsuit connected Oct. 5. “And the coins themselves are little absorbing than the usage cases of DeFi (decentralized finance) and things similar that.”  

“I americium not definite bitcoin is lone viewed arsenic an ostentation hedge,” Fitzpatrick said. “I deliberation it’s crossed the chasm to mainstream.”

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