In an eagerly anticipated decision, the US Securities and Exchange Commission (SEC) is expected to grant approval for a Bitcoin exchange-traded fund (ETF) in 2024. After a decade of rejections, the SEC's stance seems to have shifted, with experts predicting a 90% chance of approval by January 10. If granted, a Bitcoin ETF would provide traditional retail investors with a convenient way to gain exposure to the digital asset. However, the impact on the crypto market and investor sentiment remains a topic of debate.

The first scenario envisages the unlikely event of the SEC denying the Bitcoin ETF. Previously, the SEC had expressed concerns about market manipulation due to Bitcoin's global and decentralized nature. However, industry experts believe that recent applications from prestigious financial institutions such as BlackRock and Fidelity, along with changes made by issuers to meet the SEC's criteria, make a denial improbable. Dave Nadig of data analytics company VettaFi stated that the level of scrutiny required by the SEC suggests they are not looking to reject the product at this stage.

Nevertheless, a denial would undoubtedly have a significant impact on the market, as demonstrated by a recent bearish report from Matrixport, which predicted the rejection of all pending applications. In response, Bitcoin experienced a sudden crash of over 7% within minutes, showcasing the market's sensitivity to such news.

The second scenario revolves around the possibility of multiple issuers receiving approval simultaneously. Currently, there are 14 high-profile firms, including BlackRock, WisdomTree, and VanEck, vying for SEC approval. If all these firms obtain the green light, analysts believe that investor interest and capital may become diffused among the various ETF offerings. However, another player that could steal the spotlight is Grayscale.

Grayscale, a leading crypto asset manager, aims to transform its popular Bitcoin Trust (GBTC) into a spot ETF. If successful, this move could garner significant attention. Nadig suggests that if GBTC is included in the initial ETF launch, it may attract a large volume of trades, as existing investors may want to unload their positions. Currently, only accredited investors can directly invest in GBTC, but if it transitions into an ETF, it will be accessible to all investors trading on US markets.

While experts generally believe that a spot Bitcoin ETF could perform well over the long term, the immediate impact and initial capital influx remain uncertain. James Seyffart, an ETF Research Analyst at Bloomberg Intelligence, warns of potential subdued initial flows due to the simultaneous launch of multiple ETFs. He states, "It could be a flop short term and disappoint people with initial day one or two flows." Furthermore, the significant price increase of Bitcoin in 2023, driven in part by ETF hype, suggests that some gains may already be priced in.

Nonetheless, the approval of a Bitcoin ETF is expected to attract substantial capital throughout 2024, given the strong demand among investors. The market awaits the SEC's decision, which could mark a historic turning point for Bitcoin and the broader crypto market, potentially opening the floodgates for mainstream adoption and an influx of institutional investment.

As the clock ticks, all eyes remain on the SEC, cryptocurrency markets, and the future of Bitcoin ETFs in 2024.