On November 9, the crypto world experienced an actual explosion. The buzz surrounding spot ETFs continue to drive the market upwards. Bitcoin updated its yearly high, rising to $37,972, and Ethereum broke through the $2,100 mark for the first time since April this year — up by 12%. Let's dive into the reasons behind this volatility in the market.
Exchange Traded Funds (ETFs) are funds that invest in assets and issue securities against them. For example, a spot Bitcoin ETF is backed by real Bitcoin. If a company wants to invest in BTC, but cannot do it due to legal unclarity of cryptocurrencies, it can buy a legal security of spot bitcoin ETF.
If you are not aware of this financial tool, read our material: What is a spot bitcoin ETF, and why does everyone talk about it?
Negotiations between the SEC and Grayscale for spot Bitcoin ETFs
According to CoinDesk, the US Securities and Exchange Commission (SEC) and Grayscale Investments began negotiations on the details of converting GBTC from a Bitcoin trust to a spot Bitcoin ETF. On October 23, a US appeals court ordered the regulator to consider the application from the company.
However, it is important to remember that it does not follow that this application will be approved soon. The SEC may accept it later or not accept it at all. On the other hand, close contact between the regulator and the company increases the chances of a positive outcome.
If you are not aware of the Grayscale vs. SEC story, read our article about the company's victory over the regulator in court in August this year.
A window for SEC to approve all spot Bitcoin ETF applications
Bloomberg analyst James Seyffart reported that there is now a window for the SEC to approve all current applications from companies that have applied for spot Bitcoin ETFs at once. It will last until November 17 and is due to the fact that the first deadline for two applications is approaching (more on the tweets below).
However, if the regulator decides to approve the applications, it may not do so for all companies. The SEC has until January 10, 2024, to make a decision on the first nine. According to James Seyffart, there is a 90% chance that at least one of spot Bitcoin ETFs will be approved by that date.
Institutional investors demand in spot Bitcoin ETF fueled BTC to $37,972
Amid the news Bitcoin's price rose from $35,624 to $37,972, but fell to $36,700 near the end of the day.
Following this rise, the unrealised profits of one of the largest Bitcoin holders, Microstrategy, have exceeded $1 billion, as per Saylortracker. The company currently has 158,400 on its balance sheet, with an average acquisition cost of $29,874.
According to Coinglass, the Chicago Mercantile Exchange (CME) is now the leader in terms of open interest (OI) on Bitcoin. Previously, Binance was the first exchange in this interest. This is the first time such a flip has occurred.
Bitcoin OI is the sum of all open longs and shorts on the first cryptocurrency in the futures markets. It can be expressed in dollar values or in Bitcoins. Read more about OI here.
This fact may indicate that the demand for Bitcoin from large institutional market participants is higher than that of retail investors.
A well-known community influencer, @WClementeIII, tweeted that "there will soon be more suits than hoodies here", picking up on this trend.
Unexpected BlackRock’s filing to spot Ethereum ETFs fueled up ETH price 12%
In September, we wrote about two applications for spot Ethereum ETFs filed by the Chicago Board Options Exchange (CBOE): one fromVanEck, and a joint one from ARK Invest and 21Shares. However, they did not have a strong impact on BTC price.
On November 9, the largest investment company, BlackRock, applied for spot Ethereum ETF on NASDAQ, one of the main stock exchanges in the United States, specialising in stocks of high-tech companies. To do so, BlackRock registered the corporate entity "iShares Ethereum Trust" in the state of Delaware. By name, the fund is similar to their spot Bitcoin ETF, for the company is also waiting for a decision on — "iShares Bitcoin Trust".
As a reminder, BlackRock's managing director, Larry Fink, has been speaking favourably about Bitcoin and blockchain technology as of late.
The Ethereum price reacted with a surge and rose from $1,882 to $2,132 in a day. It is now trading at around $2,070.
The price of Ethereum rose by 12% in a day, outperforming Bitcoin and many altcoins.
We recommend being careful on such volatile days in the market, and stay away from FOMO.
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