Bitcoin’s price soars over 10% on ETF rumours – here’s why
Traders appear confident that a Bitcoin ETF is about to be launched in the US.
Bitcoin's price has risen by 11.3% in the past 24 hours, and 17.1% in the past week according to data from CoinGecko.
The sudden rally is likely due to optimism that regulators are about to approve a spot Bitcoin ETF in the US. This would see Wall Street megafirms like BlackRock and VanEck offering a Bitcoin ETF to their clients.
BlackRock is the largest asset manager in the world, with $US9.4 trillion assets under management.
Traders see this as bullish for a number of reasons.
First, it would make Bitcoin accessible to institutional investors like pension funds, family offices and hedge funds who previously couldn't hold Bitcoin on their books due to concerns around regulatory clarity or custody.
A bitcoin ETF paves the way for these firms to hold BTC via an ETF because custody is managed by a third party. An ETF is also a common investment vehicle traded on the stock market, which makes it highly accessible and regulated under existing securities laws.
Another reason for the excitement is that it is a "spot" ETF, which would be the first of its kind in the US.
A spot ETF means two things.
- The ETF will track the spot price of Bitcoin, which is essentially the same price that you find on crypto exchanges.
- Bitcoin will need to be held on behalf of clients, proportional to the amount of ETF units issued.
Essentially, this means that Wall Street firms will need to buy and hold Bitcoin in-line with ETF demand.
As for demand, last week BlackRock CEO Larry Fink said on Fox News that "we're hearing from clients around the world for the need for crypto" and that on-going price rally for Bitcoin was about a "flight to quality".
BlackRock's Bitcoin ETF may be close – with news today that the firm had lodged the ticker name for its iShare Bitcoin Trust (IBTC) to the Depository Trust & Clearing Corporation (DTCC).
Lodging with the DTCC is an essential step in launching an ETF, and suggests that BlackRock is confident its ETF will be approved.
Following Fink's comments, JP Morgan analysts have said they believe there is a 90% chance the ETF will be approved by the end of January.
Recent developments in the crypto industry bode well for bitcoin ETF approvals. The SEC's positions against bitcoin ETFs have weakened in court, particularly with a ruling finding that the SEC was wrong to reject Grayscale's bitcoin ETF application. Bitcoin ETF applicants like BlackRock have also recently amended their applications, suggesting that the ETF hopefuls are working with the agency towards approvals.
Whether the ETFs will be approved at all is still up for conjecture, despite the current euphoria in markets.
There are currently 8 ETFs awaiting approval by the SEC. The first of those 8 was the Ark 21 Shares Bitcoin ETF which was lodged back in June 2021.
The final deadline for the ARK 21 Bitcoin Shares ETF is 10 January 2024.
Trying to get a handle on the markets? Cut through the noise with our overview of the best cryptos to buy right now, explore some strategies for how to trade crypto or see if there's a better platform for you with our guide to the best crypto exchanges.
What is a spot Bitcoin ETF?, Bitcoin Magazine, https://bitcoinmagazine.com/guides/spot-bitcoin-etf
Bitcoin ETF Could Be Approved in Time for Christmas, Says JP Morgan, Decrypt, https://decrypt.co/202416/bitcoin-etf-could-be-approved-in-time-for-christmas-says-jp-morgan/
BlackRock Preps for Bitcoin ETF Launch, Lines Up Seed Investor and Reveals Ticker, Decrypt, https://decrypt.co/202862/blackrock-preps-for-bitcoin-etf-launch-with-amendment-showing-seed-fund-investor
Blackrock CEO Fink weighs in on Bitcoin ETF rumor, Fox Business