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Bitcoin continued its remarkable rally, fueled by the prospect of increased demand from exchange-traded funds (ETFs), achieving its highest price since May of the previous year.
The largest digital asset surged by as much as 11.5%, reaching over $35,000 before settling at $33,918 by 7:25 a.m. in London on Tuesday. This impressive surge further solidified its year-to-date rebound, which has soared by 105% from the digital asset’s downturn in 2022.
The potential approval of the first US spot Bitcoin ETFs in the upcoming weeks has significantly contributed to the speculative fervor surrounding this cryptocurrency. Renowned asset management firms like BlackRock Inc. and Fidelity Investments are actively competing to launch these investment products. Enthusiastic supporters of digital assets argue that such ETFs will lead to broader cryptocurrency adoption.
A significant development took place on Monday as a US federal appeals court formalized a victory for Grayscale Investments LLC in its endeavor to create a spot Bitcoin ETF, even amid objections from the US Securities and Exchange Commission (SEC).
The SEC has thus far been hesitant to allow ETFs directly investing in Bitcoin due to concerns over risks like fraud and market manipulation. However, the court ruling, combined with a surge in applications from major investment players seeking to launch spot funds, has led to increased speculation that the SEC might soon change its stance.
Bloomberg Intelligence ETF analyst Eric Balchunas highlighted the fact that the iShares Bitcoin Trust, managed by BlackRock, has been listed on the Depository Trust and Clearing Corp. (DTCC) with the ticker IBTC. While this does not guarantee immediate approval, it’s seen as a significant step towards launching an ETF.
Bitcoin experienced a 10% intraday surge at the beginning of last week due to the ETF hype. However, an erroneous report regarding BlackRock’s ETF approval led to a subsequent correction in the rally.
Ether, the second-largest cryptocurrency, also benefited from Bitcoin’s rally, rising by 6% to surpass $1,800. Smaller coins like BNB, XRP, and the popular meme-crowd favorite, Dogecoin, initially saw sharp increases in value before stabilizing.
Data from Coinglass reveals that approximately $387 million worth of cryptocurrency trading positions, mainly speculative bets on declining prices, were liquidated over the past 24 hours.
While the SEC has permitted ETFs that hold Bitcoin and Ether futures, it has been intensifying its regulatory actions within the crypto space. This has come in response to market volatility and notable incidents like the FTX exchange’s bankruptcy, with its co-founder Sam Bankman-Fried facing a fraud trial.
Bloomberg Intelligence analysts predict that the approval of a spot Bitcoin ETF is inevitable, with multiple funds expected to receive the green light, although the precise timing remains uncertain. Despite this rally, Bitcoin is still below its pandemic-era peak in 2021, driven by rising interest rates that reduced the demand for high-risk assets. The cryptocurrency’s correlation with traditional assets like stocks, bonds, and gold has waned recently, sparking questions about the involvement of mainstream investors in the market.
Justin d’Anethan, Head of Business Development in the Asia Pacific at crypto market maker Keyrock, commented on the situation, stating that liquidity has improved, but it still falls short of the exuberance seen in 2020-2021.
