Bitcoin’s price recently reached its highest point since May of the previous year, mainly due to increasing expectations of new demand from exchange-traded funds (ETFs). The largest digital currency saw an 11.5% rise, briefly crossing the $35,000 threshold and trading at $34,800 around 10:31 a.m. in Singapore on Tuesday. This surge added to a year-to-date increase of over 100% since the digital currency market downturn in 2022.
There’s growing excitement in the crypto world because the first U.S. Bitcoin ETFs could receive approval in the coming weeks. Financial giants like BlackRock Inc. and Fidelity Investments are in the running to offer these products, and many believe that ETFs could lead to wider cryptocurrency adoption.
A U.S. federal appeals court recently supported Grayscale Investments LLC’s quest for a spot Bitcoin ETF, even though the U.S. Securities and Exchange Commission (SEC) had raised concerns. The SEC has been hesitant to allow ETFs that invest directly in Bitcoin due to worries about fraud and manipulation in the Bitcoin market. However, applications from major investment firms have sparked speculation that the agency might reconsider its position. Eric Balchunas, an ETF expert at Bloomberg Intelligence, pointed out on the social media platform X (formerly known as Twitter) that the iShares Bitcoin Trust has been listed on the Depository Trust and Clearing Corp. (DTCC) with the ticker “$IBTC.” iShares is run by BlackRock, the world’s largest asset manager, and the DTCC manages clearing and settlement in U.S. markets. Balchunas cautioned that this listing doesn’t confirm technical approval but is a significant step toward launching an ETF.
Anticipation of an ETF caused Bitcoin to surge by 10%, although there was a temporary spike when a false report claimed BlackRock had received approval to launch a fund, which was later corrected. At the same time, as Bitcoin gained momentum, Ether, the second-largest cryptocurrency, climbed above $1,800. However, other digital assets had mixed performance, with Solana and Dogecoin erasing their initial gains.
The SEC has allowed ETFs that hold Bitcoin and Ether futures, but it’s been keeping a closer eye on the cryptocurrency industry, especially after recent market turbulence, like the bankruptcy of the FTX exchange. Bloomberg Intelligence analysts predict that a spot Bitcoin ETF will eventually get approval, and several funds are likely to get the green light, although we’re not sure when.
Although Bitcoin hasn’t yet reached its peak from the pandemic year of nearly $69,000 in 2021, it’s under pressure due to rising interest rates affecting the demand for riskier assets. Recently, the connections between Bitcoin and other assets like stocks, bonds, and gold have weakened, which has raised questions about how mainstream investors are getting involved.
Justin d’Anethan, who works in Business Development in the Asia Pacific for the crypto market maker Keyrock, noted that liquidity has improved, but it’s not at the same level as the excitement we saw in 2020 and 2021.