• Bitcoin starts the year with a fresh 21-month high

• Speculation around ETF approval induces volatility

• Asymmetric risks in place as regulatory clearance is already priced in

New year, old habits

After a spectacular 2023, Bitcoin started the new year on a volatile note amid increasing anticipation of the eventual greenlight of spot-Bitcoin ETFs by the Securities and Exchange Commission (SEC).

On Tuesday, the flagship cryptocurrency climbed to $45,912, its highest level since April 2022, during a painful trading session for major stock indices. However, the excitement did not last for long as on Wednesday Bitcoin suffered its worst intraday loss since November 2022 on the back of a report stating that US regulators would not approve ETF applications.

Although the sharp decline wiped out many leveraged positions, the bulls managed to halt the retreat and strike back, shrugging off concerns of a negative outcome in SEC’s upcoming decision. This quick recovery pretty much summarises the current state of the crypto market, with a ton of optimism already baked in despite the absence of actual proof that spot-Bitcoin ETFs will attract the anticipated institutional inflows in the industry.

The first of many volatility events in 2024

Undoubtedly, the buzz around the approval of spot-Bitcoin ETFs has been the main catalyst behind the latest bullish leg in crypto prices, but there are also other significant events in the 2024 calendar. Hence, the market’s reaction both before and after the impending decision could serve as an example of what to expect moving forward.

Specifically, there is speculation that the ETF approval might be a ‘sell the news’ type of event as crypto markets have rallied hard since BlackRock filed its first application back in summer, with the final decision acting as the perfect opportunity for some profit taking. Given that the Bitcoin halving event and Ethereum’s Dencun upgrade are scheduled to occur later in the year, crypto traders will remain on the edge of their seats as heightened volatility often creates opportunities for amplified gains.

New highs or a downside correction?

BTCUSD has experienced a massive surge since the second half of 2023, generating a series of consecutive multi-month highs. Although the year started with the best possible omens as Bitcoin posted a fresh 21-month peak of $45,912, the risks of a pullback are increasing due to the advance being significantly overstretched.

Should the medium-term rally resume, the price may revisit its recent 21-month high of $45,912. Failing to halt there, Bitcoin could face the March 2022 peak of $48,226.

On the flipside, bearish actions could send the price lower to test the recent support of $40,175. Further declines might then cease at the November support of $35,000.