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As confidence in ETFs soars, Bitcoin reaches a 17-month high

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    Bitcoin hit a 17-month high on Tuesday, recouping the losses it sustained in last year’s crash, on rising speculation that US regulators will approve stock market funds that invest directly in the cryptocurrency.

    The price of the digital currency leapt more than 10 per cent in the past 24 hours to $35,000 a token as traders grew increasingly confident the Securities and Exchange Commission would approve an exchange-traded fund in coming months.

    Its sharp rise meant that bitcoin, the oldest and most actively traded token, has pulled back all the losses it made in the wake of the failure of the Terra stablecoin last May.

    Terra’s sudden downfall sparked an unprecedented crisis of confidence and the collapse of a string of high-profile companies, including lender Celsius and Sam Bankman-Fried’s FTX exchange.

    Bitcoin’s surge has been driven by hopes that in coming months the SEC will resile its decade-long policy of refusing to approve spot ETFs, a stock market fund that hold bitcoins. Wall Street names such as BlackRock and Franklin Templeton have joined companies such as VanEck and WisdomTree in submitting filings with the SEC.

    “The SEC accepting a spot bitcoin ETF application would validate bitcoin as an established asset class alongside all other asset classes,” said Ilan Solot, co-head of digital assets at Marex, a London-based broker.

    “It could close the book on rogue and unregulated institutions leading the way on crypto. Major institutions would now have a buy-in into the sector,” he added.

    Crypto advocates have said such funds offer consumers a cheap and safe way to trade the token, instead of buying it directly from unregulated crypto exchanges.

    The SEC has argued that it cannot offer investors reassurance that the bitcoin market is not prone to being manipulated.

    However, the regulator has been under pressure since the summer after a Washington court ruled the agency was wrong to reject an application by asset manager Grayscale to turn its flagship vehicle, Grayscale Bitcoin Trust, into an ETF.

    Line chart of The price of bitcoin ($000) showing The price of bitcoin has recovered beyond the Terra Luna crisis of May 2022

    Traders said Tuesday’s gains were driven by the listing of BlackRock’s planned bitcoin ETF at the US securities market’s main clearing house.

    It came days after an updated filing from BlackRock, the world’s largest asset manager, which said that an unnamed investor planned to buy shares in the ETF. The move is common for new or upcoming ETFs in search of fresh capital. 

    “Every day, we get news further solidifying the common consensus that the SEC will approve the variety of bitcoin spot ETFs,” said Michael Silberberg, head of investor relations at Alt Tab Capital.

    Traders have been positioning themselves for a jump in bitcoin price if an ETF is approved. Earlier this month it rose by more than 8 per cent as false rumours circulated on social media that BlackRock’s application had been approved.

    CoinShares, an investment group, said that investors had put $179mn into digital asset funds over the past four weeks and were “likely linked to excitement” over a spot bitcoin ETF.

    However, it noted the flows were below the $807mn that flowed into funds in the four weeks after BlackRock made its first filing last June. It suggests “a more cautious approach from investors this time around,” it said in a research note.

    The SEC is due to make its first rulings on the ETF filings at the start of next year.


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