Bitcoin rose 6% on Tuesday to $35,198, its highest in nearly a year-and-a-half, on mounting speculation that an exchange-traded bitcoin fund is imminent. The cryptocurrency jumped to its highest level since May 2022, and other significant cryptos also gained ground.
Investors are fueled by growing hopes that the U.S. Securities and Exchange Commission (SEC) will approve an ETF that invests directly in the world’s most valuable digital currency, boosting demand for the asset and ushering in new investors. The bullishness spread across the broader crypto market and into related stocks.
Bitcoin’s surge accelerated after a court ruling that boosted the chances of Grayscale Investments’ application to convert its bitcoin trust into an ETF. The decision means the SEC will not appeal a lower court’s earlier ruling that rejecting the firm’s request was wrong. The SEC has already approved ETFs that hold bitcoin futures, but the prospect of a physical spot bitcoin ETF is expected to drive broader flows into the asset.
BlackRock, the world’s largest asset manager, is another big name with an application to list a Bitcoin ETF. The company’s proposal appeared to take a semi-step forward on Monday when its product appeared on the Depository Trust and Clearing Corp website, which provides clearing and settlement services in U.S markets. While that doesn’t necessarily mean BlackRock’s ETF has been approved, it was seen as a sign the company is confident its proposal will be approved.
Even though it has fallen sharply from its all-time high of almost $19,000 last December, bitcoin is still one of the best-performing assets this year. It is up 87%, outpacing gains in a gauge of the 100 biggest cryptos and well ahead of gold’s 21% advance.
The rally will likely be capped by the release of minutes from the Fed’s latest policy meeting, due Wednesday. Investors will look for signs that the central bank is preparing for a rate rise, dampening the demand for risky assets like cryptocurrencies. However, if the minutes show the Fed is easing its stance on interest rates, that could help bolster global stock and bond prices, pushing up the value of bitcoin. This would have the added effect of increasing demand for other assets linked to the dollar. For example, the second-largest digital currency, ether, rose 4% to around $1,724. That’s partly because many traders were moving to cover short positions on Bitcoin’s strong run-up, according to technical analyst Matteo Greco of Fineqia. It also underscores the shift in sentiment towards Bitcoin from being viewed with skepticism to now being seen as a legitimate and attractive asset class for traditional finance giants. This could prompt them to put billions into the crypto market. That’s good news for the nascent industry, which needs institutional funds to thrive. This story originally appeared on MarketWatch, a Dow Jones & Co division.
