Bitcoin spot ETF approvals look 'nailed on' for January, K33 Research says

The approval of spot bitcoin ETFs looks "nailed on" for January, with application updates suggesting filers have agreed to a cash-creation setup ahead of a Jan. 10 deadline, according to the latest K33 Research report.

Yesterday, BlackRock submitted an amended S-1 filing with the Securities and Exchange Commission, including a new cash redemption model that other analysts have said the SEC seems to be favoring. However, it left room for an "in-kind" process, subject to approval from regulators.

BlackRock likely wants to have an in-kind redemption model that would give the asset manager greater flexibility in managing the portfolio. However, the SEC reportedly favors a cash model that would require BlackRock to move the bitcoin out of storage, sell it right away and then give the cash back to the investor in the event they want to redeem shares.

“Cash creation is not the most efficient structure, but the filers’ updates are a further signal in favor of ETF approvals in the next three weeks,” K33 Senior Analyst Vetle Lunde and Vice President Anders Helseth said.

In an interview with The Block’s Frank Chaparro on The Scoop podcast, Bloomberg Intelligence ETF research analyst James Seyffart reiterated that the window for a potential spot bitcoin ETF approval was looking like it would fall between Jan. 8 and Jan. 10. He has suggested since October that there is a 90% chance of approval by Jan. 10. This is when the Ark 21Shares application, which was filed first in April, reaches its final deadline.

Bitcoin ranges amid 'pockets of altcoin euphoria'

While Bitcoin BTC -1.99% remains in a trading range between $40,500 and $43,500, and ether continues to underperform, memecoins and alternative Layer 1 tokens are showing "pockets of euphoria," Lunde and Helseth said.

Top three market cap performance.  Image: K33 Research.

Bitcoin spot volumes remain elevated, indicating the recent rally is both attracting new buyers and motivating others to take profit, leading to price consolidation, the analysts noted. However, open interest in bitcoin perps from crypto-native derivative traders has fallen to new yearly lows, showing no signs of retail froth in the asset, they said.

On the other hand, data from institutional traders on the Chicago Mercantile Exchange suggests traders there are maintaining bullish exposure ahead of the spot bitcoin ETF decision, according to the analysts. The December expiry is currently trading at an annualized premium of 17%, up from the previous week's 12%.

CME premiums. Image: K33 Research.

However, Lunde and Helseth expect significant rotation out of the CME futures-based ETF when spot bitcoin ETFs are approved. Combined with profit-taking strategies, this may reduce CME's dominance in the market going forward, with open interest potentially falling by 50%, they said.

In stark contrast, the animal spirits appear attracted to a handful of altcoins that have witnessed a "leveraged frenzy" amid a surge in open interest and price over the past week, the analysts said. Altcoins’ share of total OI in crypto derivatives has increased from 11% to 19% as a result.

Altcoin percentage of total OI, vs. altcoin dominance (ETH excluded). Image: K33 Research.

Most of this growth was concentrated on the tokens that saw the biggest price rises over the last month, such as BRC-20 token ORDI, the Solana-based memecoin BONK and new Layer 1 Celestia’s TIA. ORDI’s open interest to market cap ratio surged to 24% — more than 10 times bitcoin’s ratio — with funding rates indicating both longs and shorts have been keen to trade the volatility.

Lunde and Helseth argued that isolated leverage in other crypto assets could also be positive for bitcoin, leaving it in a healthier leverage condition — less exposed to liquidation cascades as the altcoins serve as a "pressure valve for thrill seekers."

Open interest relative to circulating supply. Image: K33 Research.