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With the SEC likely to punt any decisions on various spot Bitcoin (BTC) ETFs into 2024, BTC’s unit price has given up the bump it enjoyed after BlackRock joined the race to launch the first of these funds in the US. Rising Treasury yields are also taking a toll on Bitcoin’s recent performance and could continue to weigh heavily on the world’s largest cryptocurrency if no bullish catalysts emerge soon. Though futures-based Bitcoin ETFs have already been approved and listed, the eventual launch of a commodity-backed fund is likely to have a much more significant impact on the market price of BTC.

There is still an outside chance that a spot BTC fund launches in 2023, depending on the imminent decision in Grayscale’s lawsuit against the SEC. Grayscale filed suit against the commission last June, disputing its reasoning for denying the company’s application to transition the Grayscale Bitcoin Trust (GBTC) product into an ETF. With more than 160 days passing since oral arguments in March, the case has eclipsed the typical timeframe for the issuance of a decision. The next few batches of opinions issued by DC’s Circuit Court of Appeals will need to be watched very closely.

Related Funds & Assets: Grayscale Bitcoin Trust (GBTC), ProShares Bitcoin Strategy ETF (BITO), Bitcoin (BTC-USD)

Since hitting a more than 12-month high north of $31,400 in July, the unit price of Bitcoin (BTC) has slumped by -17.2%, retracing just about all of the gains that it made in the wake of BlackRock’s June 15 filing with the SEC to list the first spot BTC ETF. The largest portion of that decline occurred just over the past week, as the SEC chose to delay several upcoming deadlines for a decision on various ETF applications into 2024. In addition, news of SpaceX’s 2022 divestiture from a large Bitcoin position compounded surging long-term yields on US Treasuries. Higher long-term rates may suggest the bond market expects an ongoing regime of restrictive monetary policy for a longer period. The gradual pace of disinflation and a rising federal funds rate have boosted inflation-adjusted rates, also known as “real rates” throughout the past year. Surging real rates in the US have played a large role in buoying the US Dollar, which typically runs inverse to supposed inflation hedge assets like gold and Bitcoin. As of Monday morning, BTC was trading near $26,000.

Though several futures-based Bitcoin ETFs have already been approved in the US, these do not have the same impact that a commodity-backed fund would on the price of the asset. For Example, the ProShares Bitcoin Strategy ETF (BITO) holds contracts based on CME’s Bitcoin futures contracts (each worth 5.0 BTC, as defined by the CME CF Bitcoin Reference Rate), but a spot ETF would purchase BTC in the market and issue shares backed by demand for those underlying assets. In addition to giving a wider spectrum of investors confidence that the US’s regulatory regime may be softening its stance on digital assets like Bitcoin, a spot fund would directly impact demand for a finite commodity.

Only 21 million BTC can ever be mined and just 6.25 BTC per block (equivalent to 900 BTC per day) are rewarded to miners at the current pace of generation. With over two-thirds of BTC having not been transacted in a year or more, the circulating supply of BTC is already relatively illiquid. The near-term supply dynamics will…

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