The Securities and Exchange Commission (SEC) renews the warning against the “Fear of Missing Out” (FOMO) in the price of cryptocurrencies, in a context of growing anticipation for the approval of spot Bitcoin ETFs.
Let’s see below all the details.
Summary
SEC: the “FOMO” effect on price during the increase in expectations for Bitcoin ETFs
As anticipated, the Securities and Exchange Commission (SEC) of the United States has issued a new warning about FOMO crypto investments just a few days before the early approval of Bitcoin (BTC) spot exchange-traded funds (ETFs).
In a post dated January 6 on X (formerly Twitter), the Office of Investor Education of the SEC reiterated the risks associated with digital assets, including meme stocks, cryptocurrencies, and non-fungible tokens (NFT).
The post “Say no go to FOMO” initially appeared on January 23, 2021, during a bullish market for cryptocurrencies and stocks that saw Bitcoin, Ether (ETH), and other altcoins reach new all-time highs by November 2021.
It was proposed around March 2022, during the cooling of the markets.
The announcement has fueled speculation on social media about a possible imminent approval of Bitcoin ETFs before the January 10th deadline.
The SEC has drawn attention to influencers and celebrities promoting cryptographic assets, emphasizing the need not to base financial decisions solely on the recommendations of popular figures.
The report also highlighted the sanctions imposed on celebrities, such as Kim Kardashian, for undisclosed promotion of cryptocurrencies.
The SEC has warned investors about the potential volatility associated with trends and influencers, emphasizing that although initially attractive, losses can quickly accumulate in the absence of such figures.
The cryptocurrency industry is now eagerly awaiting Bitcoin ETFs, with Bloomberg ETF senior analyst Eric Balchunas predicting the approval of most applicants within the week, especially those who met the requirements before December 29th.
Contrasting expectations on the Bitcoin ETF in the USA
As we know, for over a decade, industry supporters have been begging the Securities and Exchange Commission (SEC) to approve a spot bitcoin exchange-traded fund (ETF) in the United States, which is expected to open the doors to institutional investments.
Now that the milestone seems to be approaching, opinions differ on the possible impact on the market of cryptocurrencies in case of approval.
Gabor Gurbacs, Director of Digital Asset Strategy at VanEck, suggests that while a spot ETF could generate “trillions of value” in the long term, the initial impact of US ETFs on Bitcoin may be overestimated.
As a result, it would only lead to initial flows of “a few hundred million of money (mostly recycled)”.
Other analysts predict that approval will require ETF issuers to purchase tens of billions of dollars worth of bitcoin to meet institutional demand, leading to a significant shift in supply and demand dynamics.
An analysis of flows into the SPDR Gold Shares ETF (GLD), the first spot gold ETF in the United States, indicates a significant accumulation in the first weeks and a current total assets of $57.37 billion.
Similarly, the Invesco QQQ, launched before the dotcom bubble burst, recorded significant initial inflows, highlighting the potential capital flow dynamics in the context of ETFs.
And more recently, the ProShares Bitcoin Strategy ETF (BITO), based on bitcoin futures, has raised approximately $1.5 billion, adjusted for inflation.
This happened in the first 30 days since its introduction in October 2021, a period characterized by an extremely positive sentiment in the crypto asset classes.
Another point to consider concerns the global economy, with risk-free interest rates increasing worldwide and household finances showing signs of deterioration.
In this macroeconomic context, the prospects for a rapid adoption of spot ETFs seem favorable to the financial mainstream.
