Bitcoin ETF Approval To Herald Increased Volatility Say Analysts

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The value of Bitcoin could become more volatile now that the much-hyped approval of a tranche of Bitcoin ETFs by the SEC has been confirmed.

The U.S. financial regulator approved exchange-traded funds that invest directly in Bitcoin on January 10.

Expectations for the move have boosted major coin values as investors consider the prospect of further capital inflows into the sector.

"An approved ETF can help those investors who find it challenging to overcome the technical challenges in custodying digital assets," says Antoinette Zuidweg, Alternative Investments Strategist at UBS.

Above: BTC in USD at one-hour intervals.

The SEC authorised funds from BlackRock, Invesco and Fidelity to smaller competitors, such as Valkyrie, to begin trading Thursday.

Lindsay James, investment strategist at Quilter Investors, says the SEC approval and the entry of giants such as BlackRock and Fidelity into the sector will ultimately lower trading costs whilst improving liquidity.

Quilter expects to see numerous product launches now follow suit.

BTC initially spiked to $47751 on the SEC announcement but has since pared the advance, suggesting the news has already been bought while underscoring the sector's trademark volatility.

"Compared to traditional payment methods, cryptocurrencies are considered volatile. Token value can decrease or increase periodically," says Isabelle Turner, a crypto sector expert at Safe Hamsters.

Analysts are now questioning how much further upside the approval offers crypto assets in the near term, with UBS noting Bitcoin is looking "richly priced" following the recent rally.

Zuidweg says trading-oriented investors, who believe they can time crypto assets, may see further opportunities with crypto-specific and external factors calling for more volatility in 2024.

"Bitcoin remains an incredibly speculative product subject to sharp sentiment-driven price swings. This decision from the SEC could bring about fresh volatility in the price of Bitcoin," says Quilter's James.

He explains Bitcoin remains an incredibly speculative product subject to sharp sentiment-driven price swings.

"This decision from the SEC could bring about fresh volatility in the price of Bitcoin whilst the significant number of risks associated with wider cryptocurrencies remain unresolved," says James.