Published: November 29th, 2023
New data from CoinShares says inflows to crypto exchange-traded products (ETPs) amounted to USD 346 million last week. That’s the highest they’ve been over 9 consecutive weeks, bringing year-to-date deposits to USD 1.5 billion.
Deposits into Bitcoin-specific funds came to USD 311 million, or roughly 90 per cent of the cash committed by institutional investors. Because of those inflows and BTC's rising price, the total value of crypto fund assets under management now amounts to USD 45 billion.
Exchange-traded products are investment instruments that have shares listed on an exchange. They rise and fall in value based on the performance of an underlying asset, in this case a cryptocurrency like Bitcoin or Ethereum. They can also be benchmarked against traditional assets like stocks, bonds, commodities or currencies. Their significance in crypto circles is to give traditional investors exposure to crypto markets without the volatility risk entailed by owning a cryptocurrency directly.
The US Securities and Exchange Commission (SEC) has staunchly resisted approving a spot Bitcoin ETF because regulators believe there’s too much risk of manipulation in crypto markets. Despite that stance, many industry observers say the SEC has been signaling that, against its better judgment, approval may be in the cards.
It’s worth noting that a false report about BlackRock’s Bitcoin ETF application being approved sent Bitcoin 10 per cent higher in one brief October spike. More recently, an imposter used Blackrock’s name to register a bogus XRP Trust using the company’s iShares brand. The price of XRP surged on the news and then quickly returned to Earth when BlackRock announced it was a fake.
CoinShares itself has skin in the Bitcoin ETF approval game. A fortnight ago it announced that it had secured an option to buy American digital asset manager Valkyrie's ETF business.
In late October, BTC shot past Bitcoin shot past USD 34,000, a new record high for 2023, as traders rushed to liquidate short positions. The rush led to total BTC liquidations worth USD 145 million across all crypto assets by Wednesday 25th October.
On Coinbase, BTC was trading closer to USD 35,000. The dual rallies were connected to markets anticipating imminent approval of the first Bitcoin spot ETF by the Securities and Exchange Commission (SEC).
On Tuesday 24th October, a judge in Washington, DC, ordered the SEC to look again at a heavily-litigated and long delayed spot Bitcoin ETF application from Grayscale, after the financial watchdog agency appeared to ignore an earlier court action. A report by Galaxy Digital predicts that spot bitcoin ETFs could attract inflows worth USD 14.4 billion in the first year of issuance.
Global investment giant BlackRock also amended its own BTC ETF application to say that it was now taking initial steps to prepare for launch, going so far as to allocate funds and even registering a ticker symbol. That doesn't mean approval is guaranteed or necessarily coming soon, but it certainly points to growing confidence that the SEC will be compelled to give way.
Crypto analysts say both of this week’s price spikes have pierced the previous resistance thresholds of USD 31,000 and USD 34,000. In a note of caution, crypto analyst Rekt Capital tweeted that the bullish price action probably isn’t enough annul the ‘Bearish Bitcoin Fractal,’ a pricing methodology that assumes prices sometimes rally to record highs before backsliding.
As adoption increases and crypto markets mature, BTC’s price is increasingly influenced by traditional financial factors. In May of 2022, Bitcoin clawed back losses suffered since the beginning of the year.
In the first 30 days of 2022, the BTC’s price dropped sharply and struggled to find its feet again. IAs Spring settled in, however, the factors for a rebound were already in place.
In February 2022, US Treasury Secretary Yellen told Reuters that she had 'still had some doubts’ about cryptocurrencies but added that she believed innovations to the payment system could have a positive impact. Given her extended history of crypto-skeptic commentary, traders read her more measured language as a sign that change was afoot.
BTC also crossed an important barrier when the impact of price compounding pushed the asset out of the red.
Analysts said BTC’s steady gains in Q1 2022 were likely a sign that the market jitters brought on by Russia’s invasion of Ukraine and the COVID pandemic were starting to subside.
Some of the impact was seen in the DeFi market, where comments by Terraform Labs CEO Do Kwon indicated growing BTC bullishness. Kwan told the Wall Street Journal that he planned on buying ‘billions more’ Bitcoin to fund Terra’s wallet and provide added backing for its stablecoin TerraUSD (UST) .
Of course, that statement of intent was overtaken by later events and Terra's much-publicized meltdown. Kwon also claimed that Terra had raised a total of USD three billion to seed its reserve and aimed to raise USD ten 10 billion in total, claims that later turned out to be inflated.
Concerned about premature BTC bullishness, analysts at blockchain data firm Covalent said it was too early to celebrate an end to BTC’s price rollercoaster. They said the turbulence wouldn’t end until BTC's price sustained itself for at least two consecutive weeks.
‘Most of BTC gains have been driven by macro market factors, especially the moves around stock price. Other factors making an impact are large HODLRs and big derivative positions managed by high-volume trading systems.’
It's worth noting that Bitcoin was also undergoing a change in perception, where traditional finance was starting to see it as a safe haven asset suitable for avoiding mainstream market negativity or volatility, it had more or less tracked to traditional markets since stocks crashed during the pandemic. ‘Correlation between BTC and the S&P 500 index actually reached an 18-month high last week, Covalent added.