Bitcoin experienced a six percent increase on early Tuesday, reaching $35,198, the highest in 18 months. This surge was driven by growing anticipation of the launch of an exchange-traded Bitcoin fund.
The positive momentum followed a 10 percent surge the previous day, marking Bitcoin’s most impressive performance in almost a year.
The increase in Bitcoin’s value is primarily attributed to the widespread belief that the approval of a Bitcoin ETF is on the horizon, particularly following a court ruling against the Securities and Exchange Commission (SEC) in August.
“The value of an asset … any asset basically, is the amount of people using it. So the ETF would make a large audience and increase liquidity,” said Steen Jakobsen, chief information officer at Saxo.
The specific timing and reasons for adding the iShares ETF to the DTCC list remain unclear. Both DTCC and BlackRock have yet to respond to requests for comments via phone and email.
It’s important to note that last week, BlackRock denied a report that incorrectly claimed its ETF had been approved, with sources close to the SEC confirming that the application was still pending.
Coinglass data show substantial short-covering in Bitcoin over the last 24 hours. Short-covering is when traders who bet on a price drop by selling borrowed Bitcoin decide to buy it back, often expecting a price increase to limit losses or secure profits.
Furthermore, concerns about the conflict in Gaza potentially escalating into a broader regional conflict have affected the broader financial markets.
Analysts suggest that the ongoing conflict and the emergence of Javier Milei as the leading candidate for the presidency in Argentina might have contributed to increased demand for Bitcoin. In times of crisis, Bitcoin can function as a store of wealth.
Following this surge, stocks related to cryptocurrencies, such as Coinbase Global (COIN.O) and bitcoin holder MicroStrategy (MSTR.O), experienced an increase in after-hours trading. Additionally, the cryptocurrency ether surpassed the $1,800 mark.
Speculation on regulatory shift
Despite objections from the SEC, a U.S. federal court of appeals officially confirmed a win for Grayscale Investments in its effort to establish a Bitcoin ETF that deals directly with the actual cryptocurrency.
Up to this point, the SEC has been reluctant to permit ETFs to invest in Bitcoin directly. It cited concerns like fraud and market manipulation in the underlying Bitcoin market. The recent court ruling and numerous applications from prominent investment firms to initiate spot funds have fueled speculation that the regulatory agency might eventually change its stance.
The financial regulator has already approved ETFs holding Bitcoin and Ether futures. However, in the wake of last year’s market crash and incidents like the bankruptcy of the FTX exchange, whose co-founder Sam Bankman-Fried is currently facing a fraud trial, the regulatory agency has significantly heightened its scrutiny of the crypto industry.
Bitcoin’s value remained below its peak in 2021 during the pandemic, when it reached nearly $69,000. This decline is partly due to increased interest rates, which have reduced demand for high-risk assets.
Recently, Bitcoin’s correlations with other assets such as stocks, bonds, and gold have diminished. It leads to questions about whether mainstream investors have become less involved.
Justin d’Anethan, the head of business development in the Asia Pacific at crypto market maker Keyrock, said liquidity in the crypto market had improved. Prices have also rebounded, bringing with them a certain level of liquidity. However, it’s still nowhere near the enthusiasm in 2020-2021.