Bitcoin, the largest digital asset, recently recorded a remarkable 9.8% surge over the past week, marking the most significant weekly advance since June. The rally has been predominantly fueled by growing optimism surrounding the potential approval of the first US exchange-traded funds (ETFs) directly investing in the cryptocurrency.
Historical data analyzed by Bloomberg over the past five years reveal that weekly gains of a similar magnitude often preceded an average 10% Bitcoin price increase over the following month. On Monday morning in London, Bitcoin exhibited a nearly 4% rise, reaching a peak of $30,977.
The race to offer spot Bitcoin ETFs in the US has attracted renowned asset managers like BlackRock Inc. and Fidelity Investments. The consensus among market experts is that these ETFs will usher in new capital inflows into Bitcoin, attracting greater institutional participation.
Tony Sycamore, a market analyst at IG Australia Pty, stated, “The drums seem to be beating louder that a Bitcoin ETF will be approved by year-end, which would be supportive for the token in the medium term as it will likely bring more institutional players into the space.”
Support for Bitcoin’s rally has also emerged from a shift in the Federal Reserve’s tone. Federal Reserve speakers have hinted at a reduced need for another interest rate hike, particularly in the context of tightening financial conditions.
In tandem with Bitcoin’s rise, other cryptocurrencies experienced notable gains on Monday. Ether, one of the largest altcoins, saw a 4% increase, reaching a high of $1,706. Analysts suggest that these sharp moves in altcoins were primarily driven by traders seeking to cover short positions, reacting to the growing momentum in the broader cryptocurrency market.
Noelle Acheson, author of the Crypto is Macro Now newsletter, explained this trend, stating, “As Bitcoin moves gather steam, traders are concerned the rest of the market might follow, and so are moving to unwind positions [that were] taken on the expectation of further market weakness.”
While optimism around Bitcoin’s ETF approval grows, the US Securities & Exchange Commission (SEC) has, in the past, expressed reservations about spot Bitcoin ETFs, citing concerns about fraud and manipulation in the underlying market. However, applications from major investment firms have fueled speculation that the SEC may reconsider its stance.
Furthermore, the regulator recently indicated that it wouldn’t contest a court ruling that could pave the way for the $18.4 billion Grayscale Bitcoin Trust to convert into an ETF. Analysts at Bloomberg Intelligence, Elliott Stein and James Seyffart, believe that “approval of a spot Bitcoin ETF looks inevitable” and anticipate that a batch of these funds will receive the green light, although the precise timing remains uncertain.
The SEC has already permitted ETFs holding Bitcoin and Ether futures. This development aligns with the agency’s recent measures to tighten oversight of the cryptocurrency market following market volatility and high-profile incidents, such as the FTX exchange’s troubles amid fraud allegations.
Bitcoin’s price performance in 2023 has been impressive, with an 87% year-to-date increase, surpassing the 44% gain in a benchmark of the top 100 cryptocurrencies. Bitcoin’s market dominance has also risen and currently accounts for nearly 50% of the $1.2 trillion digital asset market, a level it last achieved in 2021, as reported by CoinGecko. However, Bitcoin is still below its 2021 all-time high of nearly $69,000.
“Volatility in Bitcoin has the potential to escalate further,” commented Caroline Bowler, CEO of crypto platform BTC Markets Pty. As Bitcoin’s rally gathers momentum and regulatory developments unfold, the cryptocurrency market remains on the edge of its seat, watching for further developments in this dynamic and fast-evolving landscape.