Bitcoin rose on rumors in 2023. How to predict what comes next.

Back in October postings on X, formerly known as Twitter, suggested that the U.S. Securities and Exchange Commission had finally approved the listing of a BlackRock exchange-traded fund that would directly track the price of bitcoin. It was quickly clear that this wasn’t correct. The SEC has delayed decisions on so-called spot ETFs, with some key deadlines now in 2024.

But in a year of many challenges for crypto—from the trial of FTX founder Sam Bankman-Fried, to government actions against several big players—the momentum that has been building toward the regulatory approval of spot bitcoin ETFs has the market primed for this to eventually be true. By mid-October, the price of bitcoin had already jumped from over $16,000 at the start of 2023 to around $28,000—and is now over $43,000.

“We’ve seen the market price in ETF approval in advance," says Clara Medalie, director of research at crypto market data provider Kaiko.

Now the question is whether bitcoin might follow an old Wall Street adage in 2024: If the market bought on the rumor this year, could it sell on the news next year?

There is the usual caution for any bet on Washington to do what is expected in a straightforward manner. Though firms seeking to list spot bitcoin ETFs have recently been meeting with regulators, according to SEC memorandums posted on its website, there are indications that there could be some technical complexity introduced into approvals, having to do with whether shares are created or redeemed for actual bitcoins or for cash.

But even beyond that, ETF launches wouldn’t necessarily guarantee bitcoin price increases. It has happened before: Past launches of products that expanded the investment potential of bitcoin in the U.S. exhibited some classic “buy the rumor, sell the news" patterns, coming at market peaks. That includes the 2017 launch of bitcoin futures and the first bitcoin-futures ETF launch in 2021.

Of course the past isn’t always prologue, especially for an evolving technology. The 2017 bitcoin peak, approaching $20,000, was eventually far eclipsed by the 2021 peak, closer to $70,000. Other things could also help support bitcoin’s price in 2024, like an anticipated “halving" of the reward miners receive for processing transactions and creating new bitcoin, which can help limit the available supply. And the advent of familiar spot ETFs, akin to ones used by investors to buy gold or other physical commodities, might simply be much more significant than futures launches.

But there are still some market factors to consider. One is the role of the Grayscale Bitcoin Trust. GBTC is a publicly traded entity with roughly $27 billion in assets under management. The trust held 3.2% of all the bitcoin in circulation as of the end of September, according to a regulatory filing.

Because the SEC has previously denied GBTC’s applications to list on an exchange as an ETF, its shares can’t be continuously redeemed for bitcoin or created in exchange for bitcoin. That is how an ETF works to stay close to the underlying asset price. The upshot of that is that the price of GBTC shares can diverge from the value of the underlying bitcoin.

Earlier this year GBTC shares were trading at a 45%-plus discount to the value of its bitcoin. But that gap has narrowed, partly as expectations about an eventual ETF transition have grown, and has been under 10% lately. GBTC shares have quadrupled in price this year, well outpacing bitcoin itself.

Now, a key debate for next year is the degree to which even more investors will want to buy GBTC, should it become an ETF and close even more of that discount. Enough demand for GBTC could lead to the creation of new shares, and demand for bitcoin itself. But enough selling could likewise pressure bitcoin, too.

An active market for an ETF doesn’t strictly necessitate redeeming or creating primary shares, and in turn buying or selling the underlying bitcoin. The trading firms that would help support and make a market for the GBTC ETF can also trade in the secondary share market. So even if there is a jump in volume in GBTC, it doesn’t necessarily mean that there will be corresponding moves in the underlying bitcoin market.

“GBTC’s secondary market is robust, and unlike any other bitcoin product in the world," says David LaValle, global head of ETFs at Grayscale Investments, which sponsors GBTC.

There have already been spikes in volume in GBTC this year, like in August when a federal appeals court ruled that the SEC must reconsider its ETF denial. Some investors might have cashed out their gains, taking out some future selling pressure. But others may have pre-purchased what they believe will soon be an ETF, pulling forward some future demand.

Despite the price rally, trading volume and market depth in bitcoin remains relatively thin, having dropped since the collapse of FTX, according to a recent Kaiko research note. “An ETF approval could change this," Kaiko analysts wrote. Deeper liquidity can also then dampen volatility and price movements.

Many in the industry have argued that financial advisers or brokers who put guardrails for their clients around investments in a non-listed stock like GBTC has been, or in direct crypto holdings, could be a major source of new demand for any listed spot ETF.

A survey conducted from February through April by the Journal of Financial Planning and the Financial Planning Association found that about 3% of respondents were planning to increase their cryptocurrency recommendation or usage over the next year. Maybe that has grown this year, and it was up from about 1% in 2019. But notably, ETFs in general had the biggest expected increase.

So what we may learn next year is whether an old wrapping on a new technology can change the script for bitcoin.

Write to Telis Demos at Telis.Demos@wsj.com