Could the Approval of Bitcoin Spot ETFs Trigger One of the Greatest Wealth Destructions in Bitcoin's History?

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2023 has been a really epic year! Our newsletter gained over 200,000 new subscribers, and overall, things have been really eventful! Thank you for joining us on this journey, and we are so excited for what 2024 will bring!

While we have always maintained a contrarian approach to the general stance on Bitcoin ETFs, which many claim will usher in trillions of new inflows and be all accepted by SEC, we recognize the benefit of examining both sides. By doing so, you can develop a strategy that is low-risk and high-reward, and aim for maximized returns during this cycle.

Let's assume for a moment that the media and their unnamed "sources" are correct, and that the Bitcoin Spot ETFs will be approved either tomorrow by the SEC or sometime next week.

There are few, if any, indicators suggesting that this would positively impact Bitcoin. In fact, based on many other factors we will mention later and how this market reacts to viciously to news events, it is more likely to trigger a massive crash. Virtually none of the analysts, who have been closely following the ETF story, have also noted such a positive effect, likely due to their own private concerns.

Earlier today, Grayscale, Ark Investments, Valkyrie, and VanEck became the latest firms to file their Form 8-A’s, which admittedly strongly signals progress towards a potential spot bitcoin exchange-traded fund.

100% of Foreign Bitcoin Spot ETFs Failed

To determine how a Spot ETF would perform, it’s best to avoid the speculation from maximalists and Bitcoin fanatics, who will obviously say good things in order to lure more investors, but rather focus on other examples.

I spent lots of time researching other ETF approvals for Bitcoin, and could not find a single one that performs well. To start, The Jacobi Bitcoin ETF, launched in Europe, has experienced an unexpectedly tepid response.

Since November 2nd, almost no one has engaged with the fund. With a total trading volume of just $1.7 million since its inception, the ETF's performance can be described as lackluster at best. There are 750 million Europeans that have access to this Spot ETF, and only 1 person has traded it within the last 2 months. Ouch!

Additionally, Canada has had five Bitcoin spot ETFs for over two years now. Launched in 2021, the market has since faced a significant drop afterwards, which we will discuss later on as well. They were once the main narrative that Bitcoiners used, but as soon as they saw the failing demand, it was never mentioned again.

This situation raises important questions about the potential reception of a Bitcoin ETF in the U.S. market. If Bitcoin Spot ETFs have failed in every other country where they were approved, why would they magically succeed in the U.S.? Yes, BlackRock and Fidelity are much larger firms and have way more clients, but even multiplying the volume of existing European ETFs by x100 or x1000 would by minimal. Considering that much of this rally was spurred by rumors of it triggering huge demand, investors are likely to be very disappointed when faced with the reality of low demand.

Once this realization sets in, and with no more active narratives to drive price increases, we are going to witness an enormous sell-off, as is often the case. The reason this crash will be historic, is because this false idea of “institutional adoption” which is non-existent, is the single-largest narrative that has been pushed by Bitcoiners. Once this passes, there is no repeating it. No other narrative can live up to this one, unless they start claiming things like the U.S government is adopting it.

Mirroring 2017 and 2021 Peaks.

One thing that often isn’t talked about is how this story closely mirrors the events at the peak of the Bitcoin market cycle in December 2017 and October 2021.

In 2021, we saw very similar headlines to what we’ve been seeing now. Valkyrie, ProShares, VanEck, and others filed Form 8-A with the SEC, which, as mentioned, is a key form signalling imminent approval. This represented one of the final stages in the application process.

The BTC Futures then officially launched on Nasdaq in late October, and just under two weeks later, the Bitcoin market reached its peak, marking the start of its longest bear market in history as it plummeted from $65,000 to under $16,000.

The Bitcoin Futures ETFs were touted as a massive bull trigger, but in reality, they were what popped the bubble. It was a typical "sell-the-news" event, where hype inflated the bubble, but once there were no new narratives to inject fresh money into the market, things began to dry up, leading to a plunge.

This isn't the first time that these Wall Street products have resulted in a massive drop. The launch of the first-ever Bitcoin Futures in December 2017 also "coincidentally" marked the exact peak of the market.

While many current Bitcoin investors weren’t around in 2017 and unaware how things were, I was, and can tell you that it mirrors this almost identically. Everyone was going all-in at the top, FOMO was at its peak, and everyone was talking about how this event was insanely bullish and would push prices to 1 million or higher.

The day they launched was the day Bitcoin hit its all-time highs, and from there, it was a downward trend for the next year, with prices plummeting from over $18,000 to under $3,000. Pretty much the opposite of what everyone on CT predicted.

Do you trust Wall Street?

The main focus for investors shouldn't be on whether a Spot ETF gets approved or not. At this stage, the overwhelming majority of media and banks claim there is a 99.99% chance of approval, citing “insider sources,” which, of course, cannot be verified. These are merely rumours, and speculating on them is anyone's guess.

The focus should be on Wall Street and their history. Should we trust them to enter the Bitcoin markets with Spot ETFs and believe that this will usher in trillions of dollars of new funds, as many Bitcoin maximalists like Anthony Pompliano and Michael Saylor have predicted?

Or are they using ETFs to exploit the remaining demand in Bitcoin for trading fees, and employing market manipulation tactics to gain greater control of the market? After all, to date, virtually every product they have launched related to BTC has triggered a bear market. What makes this any different?

The process of creating and redeeming shares in the Spot ETF could potentially be subject to manipulation. If the process lacks transparency, or if there is a mismatch in the timing of creation/redemption and the underlying Bitcoin market, this might create opportunities for price manipulation.

Furthermore, large players (aka whales), might be more inclined to manipulate the price of Bitcoin using fake news or other dubious tactics to benefit their positions in the ETF, potentially leading to artificial inflation or crashes in Bitcoin’s price. This concern is based on the premise that Wall Street has historically been involved in manipulating the prices of numerous assets, and BTC could be particularly vulnerable to such tactics, given the relative ease of manipulating its prices.

Just this week, a report from some random on X with around 400 followers claimed in his report that the Bitcoin ETFs would be denied (contrary to media predictions), and Bitcoin's value plummeted by 9% in minutes, with over $682 million in long positions being liquidated. Whether it is accurate or not, this incident raises serious concerns how some tiny article could have such a big impact on the price.

Another final concern of mine is the requirement for ETFs to adhere to regulatory requirements set by the SEC, which could lead to forced buying or selling. This, in turn, might impact Bitcoin prices. For instance, if regulations change and an ETF is compelled to unload a significant amount of Bitcoin, it could severely depress the price. Consequently, regulators and Wall Street firms are gaining more control over the price, as their policies can directly influence it.

I don’t need to say this, as it's widely recognized, but the SEC is extremely corrupt. From the targeted political attacks against Ripple and other crypto firms to the numerous scandals involving their inaction, and the former Chairman joining a pro-Bitcoin board immediately after leaving, it is all very dubious.

Danger Alert: Bearish Signs Amidst Extreme Greed

The Fear and Greed Index recently re-entered the extreme greed phase, a common occurrence during market peaks.

If you’ve been actively browsing social media in the last few days, you might have noticed the palpable greed in everyone's posts. This is a stark contrast to a few last year when fear/despair was prevalent. You can see how quick sentiment changes. The Bitcoin community has emerged from the shadows, and is now making outlandish predictions. Even mainstream media is setting insane targets, ranging from $500,000 to $1,000,000 by 2024. It should be obvious, but I’ll clarify: this is not going to happen.

We saw the same thing a few years back in 2021 Bitcoin Bull Run. Can you see how repetitive this is becoming? It’s the exact same narrative and scheme they used in 2021, now being attempted again in 2023-2024. But I assure you, as I did back then, that approach will not age well.

While this article mainly focuses on ETFs, there are dozens of other factors that also put a negative pressure on Bitcoin, and will also play a role in the impending crash. One being how the U.S Government was just approved a few weeks back to sell-off over $1.8 billion worth of Bitcoin, which is more then the holdings of giants like MicroStrategy. This went unnoticed because the crypto media barely reported on it, not sure if many were on holidays or just didn’t want to be a party pooper for the ETF narrative rally. If the government dumped this today, BTC would easily crumble under $3,000 again. No, that wasn’t a spelling error. $3,000.

Additionally, our views align closely with Markus Thielen's, who is the Head of Research at Matrixport. He mentions that despite the strong Q4 Rally, there are many bearish signs in the U.S stock market, bearish funding ratios, and outstanding future contracts, which further contribute to Bitcoin's weakness. We already know that BTC is closely correlated with the stock market, so when the general economy begins slipping, especially during 2024’s election season and the shenanigans that brings, I think things will get rocky, and demand will drop like a rock.

Bitcoin was originally designed by Satoshi to challenge the banks and provide an alternative payment method after the 2008 financial crisis. However, it has clearly and undeniably faltered in that aspect due to slow transaction times and high fees, issues even warned about by Satoshi in early discussions. Unfortunately, greed has taken over, which is expected due to human nature. While the initial community criticized corrupt Wall Street and focused on innovating Bitcoin and being open to alternatives, the newer community of retail, moon boys, and maximalist extremists are fixated on a greedy mindset. They're begging figures like BlackRock’s Larry Fink to bail them out to boost prices for more fiat gains.

Consistently, I've highlighted this entire ETF narrative as a minor blip in the markets. For those heavily invested in Bitcoin, my advice remains unchanged: Take profits as the market rises because these prices are certainly not sustainable. It's a fleeting bubble driven by the latest narrative, certain to fade like its predecessors.

For those patiently observing from the sidelines, maintaining rationality and setting emotions aside is crucial. If the ETF gets approval on Friday or next week, as many anticipate, numerous investors (especially inexperienced ones) will wake up in the morning and blindly flock to their trading account on Coinbase and spend their last remaining bank balance on buying at the peak of the cycle. This scenario would thus provide a chance for big whales, who are smart enough to know the ETF narrative is a nothing-burger, to leverage this liquidity and unload their holdings, resulting in a historic crash.

Share Your Thoughts

As always, our goal with this newsletter isn't to criticize or bash Bitcoin. We simply aim to share contrarian insights and offer a viewpoint that you won’t find from traditional financial media sources.

Being informed about the good, bad, and ugly aspects of crypto assets is beneficial as it will help you make more informed investment decisions.

What do you think? Do you think the Bitcoin Spot ETF will be approved or denied, and what are your predictions on it’s long-term and short-term impact. I’m curious!

Stay informed, and stay tuned for more updates from WhaleWire!