Dan Morehead, the CEO of Pantera Capital, is convinced that the crypto market has entered another bull cycle. However, he warns that the adoption of a Bitcoin ETF could negatively affect the price.
Bitcoin Is Getting Closer To Its All Time High
In a message to investors, Morehead said that:
“After a period of temporary insanity, including fears that China’s ban on Bitcoin mining would ruin the industry and heated debates about the environmental impact of Proof-of-Work cryptocurrencies, we are now in a new bull market.”
The Bitcoin price has risen sharply since the beginning of October. In a month’s time, the price has risen by more than 17%. The largest cryptocurrency even reached a local high of $57,007 earlier today. At the time of writing, the BTC price is around $56,600. That means BTC is only 12.6% away from Bitcoin’s all-time high of $64,830 reached in April this year.
Still, according to Morehead, there is one possible event that could reverse the uptrend. And, somewhat surprisingly, he points to a possible launch of a Bitcoin ETF.
What is a Bitcoin ETF?
An ETF is a publicly traded investment vehicle that tracks the price of an underlying asset. A Bitcoin ETF would thus track the value of the Bitcoin and offer investors access to the cryptocurrency without the need to buy and store a ‘physical’ BTC.
While Bitcoin ETFs are already available to investors in countries such as Canada, Brazil and Dubai, the U.S. Securities and Exchange Commission (SEC) has rejected every application so far. This is because they find the price too volatile and there is a risk of market manipulation. However, after years of rejection, an approval seems to be getting closer.
While it is widely believed that the adoption of a Bitcoin ETF in the US will further drive the Bitcoin price, Pantera’s CEO has warned that it could be the exact opposite.
“On Wall Street there is a saying, ‘Buy the rumor, sell the fact.’ This saying certainly works in the crypto world as well,” wrote Morehead.
To explain this statement, Morehead reminded us of two high-profile events in the past, both of which, despite optimistic expectations, resulted in a long bear cycle, with the Bitcoin price plummeting about 83% and 53%, respectively.
Buy the rumor sell the news
First, there was the launch of Bitcoin futures on the Chicago Mercantile Exchange (CME) in December 2017. Then crypto fans kept shouting, “When the CME lists bitcoin futures, the price shoots TO THE MOON! ‘”
The price was up 2,440% until the actual day the futures were listed. From then on, a bear market began in which the price fell by 83%, the CEO of Pantera said.
Earlier this year, a similar thing happened when Coinbase went public. The Bitcoin price rose 822% to the day of the listing, but immediately after Coinbase shares hit Nasdaq, a -53% bear market started.
With this in mind, he suggests the same thing could happen once a Bitcoin ETF is approved.