Will The Bitcoin ETF Be A “Sell The News” Event?

There’s a fair chance the US Securities and Exchange Commission (SEC) will approve one or more spot Bitcoin Exchange Traded Funds (ETFs) this week. This would be major news for bitcoin. So naturally, investors are speculating whether the ETF approval could be a “sell the news” event. Here’s what you need to know.

What would a spot bitcoin ETF mean or bitcoin?

An exchange traded fund (ETF) is exactly what it sounds like – a fund that trades on a stock exchange. So with bitcoin ETFs, investors could “indirectly” buy bitcoin on the Nasdaq. They’d buy shares in the ETF, and the ETF provider would then buy bitcoin to match the value of those shares. 

That would make it much easier for the average investor (retail or institutional) to buy bitcoin. So in the long run, it’s likely to make the bitcoin price go up. There would be more buyer demand for an asset with a limited supply of 21 million coins. Simple enough.  

A bitcoin ETF would also be a final stamp of approval from Wall Street and the US regulators. BlackRock, Fidelity, and several other giant ETF providers would essentially be marketing and selling bitcoin to their clients. Legally.

Side note: The ProShares Bitcoin Strategy ETF (ticker: BITO) started trading on the Nasdaq in October 2021. This uses futures contracts to try and replicate the price moves of bitcoin. Unlike a spot ETF, it’s not backed by actual bitcoin. 

What’s a “sell the news” event?

“Buy the rumor, sell the news” is a well-known phrase in investing. Here, the “smart money” buys into an investment during the build up to the news event, which drives the price higher. By the time the event happens, they’re already in massive profit. So when the hype of the event is peaking, they sell their investments (in this case, to the “dumb money”). This causes the price to go down on the good news instead of up. 

Will the Bitcoin ETF approval be a sell the news event?

Predicting bitcoin’s next move is no easy feat – especially if it’s based on the outcome of a potential news event. But as it stands, bitcoin is still in an uptrend, and uptrends tend to continue more often than not. 

Besides, if the ETF announcement is a “sell the news” event, it probably won’t last that long. And in my opinion, the drop would be a great long-term opportunity to buy bitcoin. 

Remember, ETF providers make money from fees based on the amount of assets they hold for their investors. Do you really think they’d jump through all the SEC’s hoops just to set themselves up for failure?

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