Bitcoin tread water on Wednesday as investors awaited the official U.S. Securities and Exchange Commission approval on spot bitcoin exchange-traded funds, a day after the regulator's X account posted a false announcement on the highly anticipated news.
The price of bitcoin was last lower by more than 2% at $45,699.19. Meanwhile, ether surged 12% to $2,531.98, its highest level since May 2022. The token tied to Polygon, a blockchain that runs alongside Ethereum, gained 11% Wednesday.
Bitcoin and ether initially spiked on Tuesday afternoon in the short period before the SEC said its X, formerly known as Twitter, account had been compromised and misinformed the public. Bitcoin rose as high as $47,901, though that wasn't the rocket ship rally many hoped to see.
"The price action was a nightmare for shorter-term leveraged traders, but ultimately, there wasn't much change, with bitcoin holding up and still looking in position to make a push through $50,000 on the actual confirmation of the SEC approvals," said Joel Kruger, a market strategist at LMAX Group.
Wednesday marks the deadline for the SEC to either approve or deny the Ark 21Shares spot bitcoin ETF application. It is widely believed that the agency will approve several at once. Some investors expect the decision to be a sell-the-news event, while others expect a big rally.
Data provider CryptoQuant shows that investors are sitting on high unrealized profits — a trend that historically precedes price corrections. If bitcoin does see a big pop after the SEC's decision, bitcoin could be at risk of a correction to as low as $36,000, Julio Moreno, CryptoQuant's head of research, told CNBC.
"As much as bitcoin demand will certainly gain from the approval of the ETFs … a price correction can't be ruled out," he said.
Rotation into ether
Meanwhile, investors are looking ahead to what comes after a bitcoin ETF approval, particularly for ether.
"Ether has taken a big hit against bitcoin in recent months, but on Tuesday, we saw signs of a bottom for ether against bitcoin after the ETH-BTC rate rallied over 8% off the lows," Kruger said. "It's possible the market is starting to look past what it believes is now a near certainty with the bitcoin spot ETF approvals, and is now thinking about the next push towards an SEC approval of spot ETH ETFs."
The SEC is due to give decisions on spot ETH ETF applications beginning in May. BlackRock, Invesco, Ark and VanEck are among the firms in line for approval, as well as Grayscale, which is seeking to convert its existing Ethereum Trust (ETHE) into an ETF.
Ether lagged bitcoin in 2023, rising just 90% compared to bitcoin's 157%. Ether rallies tend to follow bitcoin when crypto bull markets heat up, and precede altcoin rallies.
—CNBC's Nick Wells contributed reporting
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