Bitcoin (BTC) rose to a three-month high this morning on reports that the SEC had approved a spot-backed BTC ETF. That reporting was inaccurate, however, which pared a large portion of the gains. Still, the spike provided a preview of how markets would react to an eventual approval of such a product. Bitcoin’s dominance among all other digital currencies has surged recently, with BTC now comprising more than 50% of the entire cryptocurrency market cap. Bitcoin’s resilience has likely been bolstered by ETF hopes, as well as very strong hands among BTC owners. More than two-thirds of BTC’s circulating supply has not moved in a year or even longer.
Judges in the DC Circuit Court of Appeals will issue guidance in the coming days for how the SEC should work with Grayscale on the latter’s pending application to convert its Bitcoin trust product (GBTC) into a spot ETF. Grayscale’s application for the product shift was originally rejected by regulators, but a lawsuit against the commission has voided that decision and the SEC’s rationale for issuing it. The SEC’s window to appeal the court’s judgement expired last week with no such filing.
Related ETF & Assets: ProShares Bitcoin Strategy ETF (BITO), Bitcoin (BTC-USD)
The unit price of Bitcoin (BTC), the largest cryptocurrency by market cap, touched $30,000 this morning, its highest level in nearly three months. This spike was short-lived, however, as the move seemed to be based on mistaken reporting that BlackRock’s application to launch a spot BTC ETF had been approved by the Securities and Exchange Commission (SEC). Still, Bitcoin is hanging on above the $28,000 mark. That has helped boost October’s month-to-date gain, equivalent to 3.8%, following a 4.0% gain in BTC’s first green September since 2016. The resilience of Bitcoin has played in contrast to a broader weakening of smaller digital currencies. As Bitcoin’s market cap has bounded toward the $550 billion threshold, its dominance measure, which gauges BTC’s share of the cryptocurrency market as a whole, surged past 50.0% in recent days for the first time since June. The exchange rate for one Ethereum (ETH), the second-largest cryptocurrency, has now fallen to just 0.056 BTC, a 16-month low.
The comparison to June is significant, considering it was the month of BlackRock’s groundbreaking S-1 filing that originally launched their bid to offer a spot-BTC backed ETF in the US. That surprise announcement, followed by CEO Larry Fink’s assertion that Bitcoin is “digitalizing gold and “could revolutionize finance”, has made the ETF narrative a pervasive price-driver for the past several months, with the prospect of an eventual approval perceived as a material bullish catalyst. Numerous other firms, including Valkyrie, VanEck, WisdomTree, Fidelity and ARK Invest have similar applications pending alongside BlackRock’s. Though futures-based ETFs tracking the price of Bitcoin have already been trading in the US for some time, those only purchase futures contracts. Asset managers sponsoring custodial spot products would need to buy BTC in the market to back the shares the fund would issue. Estimates from NYDIG suggest that spot-based ETFs could herald up to $30.0 billion in new demand for BTC. That demand will need to run up against a consistently thin supply of BTC liquidity.
Bitcoin’s blockchain is a public blockchain, which means all transaction data can be viewed and extracted from it for analysis. By utilizing this on-chain data, we can observe that more than 68.5% of BTC has not been transacted in a year or longer, suggesting owners controlling the majority of the circulating supply have weathered a massive drawdown in the final months of 2022, and then…
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