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Bitcoin’s Remarkable Rally: ETF Hopes Propel Price to 2022 Levels

Bitcoin’s Impressive Rally

Bitcoin is on an extended rally, buoyed by optimism surrounding potential demand from exchange-traded funds (ETFs), reaching its highest price since May of the previous year.

Double-Digit Surge

The largest digital asset saw a substantial increase of 11.5%, briefly surpassing the $35,000 mark before retracing some gains. As of 7:25 a.m. in London on Tuesday, it was trading at $33,918. This surge has pushed Bitcoin’s year-to-date recovery from the 2022 digital-asset downturn to 105%.

ETF Approval Anticipation

Speculative fervor for Bitcoin has been fueled by the prospect of the first US spot Bitcoin ETFs gaining approval in the coming weeks. Major asset management firms, including BlackRock Inc. and Fidelity Investments, are vying to introduce such products. Supporters of digital assets argue that ETFs would expand the adoption of cryptocurrencies.

Victory for Grayscale Investments

On Monday, a US federal appeals court formalized a victory for Grayscale Investments LLC in its quest to create a spot Bitcoin ETF, despite objections from the US Securities and Exchange Commission (SEC). The SEC has thus far resisted allowing ETFs with direct Bitcoin investments, citing concerns about fraud and manipulation in the underlying market. However, the recent court ruling and the flurry of applications from prominent investment firms have kindled speculation that the SEC may reconsider its stance.

DTCC Listing Signals Progress

Bloomberg Intelligence ETF analyst Eric Balchunas highlighted on 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. BlackRock, the world’s largest asset manager, manages the iShares business. While this listing doesn’t represent full approval, it’s a significant step in the ETF launch process.

Recent ETF-Driven Surges

Last week, Bitcoin experienced a 10% intraday surge due to ETF hype. However, this rally was triggered by an erroneous report claiming that BlackRock had obtained approval to launch a fund, and the excitement waned when the error was corrected.

Ripple Effects on Other Cryptocurrencies

Ether, the second-largest cryptocurrency, surged 6%, surpassing $1,800, in the wake of Bitcoin’s rally. Smaller coins like BNB, XRP, and the meme-favorite Dogecoin initially surged sharply before moderating.

Liquidated Trading Positions

Coinglass data reveals that approximately $387 million worth of crypto trading positions, primarily held by speculators betting on price declines, were liquidated in the past 24 hours.

SEC’s Evolving Stance

The SEC has already permitted ETFs holding Bitcoin and Ether futures, but it has intensified its regulatory oversight following last year’s market turbulence and the collapse of the FTX exchange. The agency’s scrutiny of the cryptocurrency market has grown, with legal action being taken against key figures.

Prospects for a Spot Bitcoin ETF

Bloomberg Intelligence analysts Elliott Stein and James Seyffart believe that the approval of a spot Bitcoin ETF is becoming increasingly likely. They anticipate that a wave of funds will receive the green light, although the exact timing remains uncertain.

Bitcoin’s Current Status

While Bitcoin has rebounded, it is still below its pandemic-era peak in 2021, when it neared $69,000. Rising interest rates have dampened demand for risky assets, affecting Bitcoin’s performance. Recent trends have also sparked questions about its correlations with traditional assets like stocks, bonds, and gold, and whether mainstream investors are losing interest.

Liquidity Improvement

Justin d’Anethan, Head of Business Development in the Asia Pacific at crypto market maker Keyrock, noted that liquidity has improved somewhat. Prices have recovered, and some liquidity has returned, though it still doesn’t match the exuberance of 2020-2021.

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