Bitcoin’s Price Surges as Speculation Grows for an ETF Approval

Bitcoin Soars to Near 18-Month High as ETF Speculation Mounts

By Tom Wilson and Tom Westbrook | October 24, 2023 9:04 AM UTC

Bitcoin, the world’s most famous cryptocurrency, rose by 6% on Tuesday to reach $35,198, its highest level in nearly a year and a half. This follows a 10% surge on Monday, marking its best day in almost a year. The recent bullish trend is attributed to mounting speculation that an exchange-traded bitcoin fund (ETF) is imminent.

The Impact of ETF Approval

Many experts believe that the approval of a bitcoin ETF by the U.S. Securities and Exchange Commission (SEC) would significantly boost demand for bitcoin. The argument is that a spot bitcoin ETF would allow investors who have been wary of cryptocurrencies to gain exposure to this digital asset through the stock market, leading to a new influx of capital into the sector.

“The value of any asset, basically, is the amount of people using it,” said Steen Jakobsen, Chief Investment Officer at Saxo. “So the ETF would make a large audience and increase liquidity.”

This potential increase in liquidity could further stabilize the price of bitcoin, as greater participation often leads to a more efficient market. Additionally, it would give institutional investors a regulated and easily accessible way to invest in bitcoin, potentially legitimizing the cryptocurrency further in the eyes of the general public.

The Ripple Effect in the Crypto Market

Bitcoin‘s surge has not been limited to its own price. The positive sentiment has spread to the wider crypto market, with the second-largest cryptocurrency, Ether, also reaching its highest level since August.

Furthermore, crypto-linked shares such as Coinbase Global and MicroStrategy have experienced a boost in after-hours trade. This indicates that investors are not only interested in direct exposure to cryptocurrencies but also in companies closely tied to the success of the digital asset market.

In addition to these companies, investment giant BlackRock is among several major financial firms with pending applications for bitcoin ETFs. Recent reports, including from Reuters, suggest that the SEC may not appeal a court ruling stating that it was wrong to reject an ETF application from crypto firm Grayscale Investments. This has further fueled speculation about the eventual approval of bitcoin ETFs.

While BlackRock denied previous reports that its ETF had been approved, the fact that it appeared on the website of clearing house DTCC has raised eyebrows. Whether this was an error or a deliberate leak is unclear, but it has only added to the growing anticipation surrounding bitcoin ETFs.

Short-Covering and Market Dynamics

Data from crypto derivatives analysis site Coinglass has shown heavy short-covering in bitcoin over the past 24 hours. This suggests that traders who had previously bet on a decline in bitcoin‘s price are now closing their positions to minimize potential losses. This short-covering, combined with the anticipation of ETF approval, has contributed to the recent surge in bitcoin‘s price.

Editorial and Advice

The speculation surrounding the potential approval of a bitcoin ETF reflects the increasing mainstream interest and acceptance of cryptocurrencies. However, it is important to exercise caution when investing in highly volatile assets like bitcoin.

While the potential for an ETF to bring more stability and liquidity to the bitcoin market is promising, it does not eliminate the inherent risks associated with cryptocurrencies. Bitcoin‘s rapid price movements and regulatory uncertainties still pose challenges for investors.

Investors considering exposure to bitcoin should carefully assess their risk tolerance and diversify their portfolios accordingly. It is recommended to consult with financial advisors who specialize in digital assets to navigate the complexities of this evolving market.

The potential approval of a bitcoin ETF should not overshadow the importance of understanding the underlying technology and the fundamental factors driving the value of cryptocurrencies. Educating oneself about blockchain technology, decentralization, and the potential use cases of cryptocurrencies is crucial for making informed investment decisions.

Overall, the rise of bitcoin and the anticipation of ETF approval demonstrate the growing interest and potential for cryptocurrencies in the financial world. However, it is essential to approach this emerging market with caution, ensuring that investors fully understand and manage the risks involved.