Bitcoin climbed to the highest level since early May, buoyed by crypto initiatives involving major players from the traditional financial sector.
The largest digital asset rose as much as 3% and traded at US$28 720 as of 11.10am in Singapore on Wednesday, lifting the token’s rebound this year to 74%. Smaller coins such as ether, cardano and solana also posted gains.
Crypto investors have drawn succour from the start of digital-asset exchange EDX Markets, backed by firms including Citadel Securities, Fidelity Digital Assets and Charles Schwab. Separately, BlackRock and WisdomTree have applied in quick succession to launch spot US bitcoin exchange-traded funds.
Those moves dissipated some of the gloom caused by a US Securities and Exchange Commission crypto crackdown that includes lawsuits against exchange operators Binance Holdings and Coinbase Global. The agency in the process designated a raft of digital tokens as unregistered securities.
“The rally is backed by institutional demand,” said Hayden Hughes, co-founder of social-trading platform Alpha Impact. “The BlackRock announcement on a bitcoin ETF, plus EDX Markets, gave bitcoin a boost on hopes that traditional institutions will add depth to the crypto market.”
WisdomTree is trying again for permission to start a spot US bitcoin ETF after being rebuffed in the past. BlackRock made its filing on 15 June. The SEC has resisted allowing such spot funds but BlackRock’s attempt carries the heft of the world’s largest asset manager and its track record of winning approvals.
‘Changed everything’
“The BlackRock filing changed everything; that reignited the race,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence.
BlackRock’s application landed amid Grayscale Investments LLC’s legal battle with the SEC to convert the Grayscale Bitcoin Trust into a physically backed ETF. The trust’s discount to net asset value has narrowed sharply on speculation BlackRock’s step could end up bolstering Grayscale’s case.
Meanwhile in Europe, Deutsche Bank has applied for regulatory permission to operate a custody service for digital assets.
“It is extremely unlikely it would go through the cost of doing this unless it had received sufficient expressions of interest from its large clients,” wrote Noelle Acheson, author of the Crypto Is Macro Now newsletter.
Markets are also being shaped by macro forces, including the outlook for further US monetary tightening after the Federal Reserve paused interest-rate hikes this month. Some onlookers expect a hawkish tone from Fed chair Jerome Powell in an upcoming report.
Traders are waiting for more clarity, too, on the scale of expected economic stimulus in China, where the central bank recently cut borrowing costs. The potential China stimulus impact on bitcoin isn’t “getting enough airplay”, said Tony Sycamore, a market analyst at IG Australia.
A rout in crypto last year erased $1.5-trillion and contributed to blowups such as the bankruptcy of the FTX exchange. Bitcoin remains far below its pandemic-era, liquidity-fuelled 2021 peak of almost $69 000. — Suvashree Ghosh and Akshay Chinchalkar, with Olga Kharif, (c) 2023 Bloomberg LP