Bitcoin experienced a sharp ascent, reaching a 21-month high on Tuesday, propelled by escalating speculation surrounding the potential approval of a spot exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC). The cryptocurrency surged by 6% to $45,168.6 at 21:35 ET (02:35 GMT), marking its highest level since early April 2022. However, trading volumes remained subdued due to the ongoing New Year holidays.
This surge in Bitcoin follows a stellar recovery in 2023, during which the digital asset soared by over 100%, starting the year at approximately $17,000. The recent uptick is primarily attributed to speculations about the approval of a U.S. ETF directly tracking Bitcoin prices. A Reuters report indicates that the SEC faces a January 10 deadline to either approve or reject a spot ETF application from Ark and 21 Shares, potentially setting the precedent for similar applications from other fund managers.
The SEC is expected to notify additional applicants this week about the clearance status for launching their products by January 10. Notably, BlackRock Inc, the world’s largest asset manager, has also submitted an application for a spot bitcoin ETF.
Despite previous rejections over the past two years, the SEC expressing concerns about Bitcoin’s decentralized and volatile nature, the anticipation for a spot ETF has grown. Currently, all U.S.-traded bitcoin ETFs track the token’s futures, traded on the Chicago Mercantile Exchange. Grayscale, operating the GBTC ETF, secured a legal victory against the SEC, prompting a reconsideration of its spot ETF application.
Advocates of cryptocurrency assert that the approval of a spot ETF could trigger a significant influx of capital into Bitcoin, providing traders with an avenue to invest without directly holding the cryptocurrency. However, analysts caution that the expected bull run may not materialize as anticipated, citing lingering concerns within the crypto industry stemming from high-profile bankruptcies and regulatory crackdowns over the past two years.
While hopes for ETF approval fueled a robust recovery in 2023, trading volumes remained considerably lower than those witnessed during the 2021 bull run. Additionally, high-interest rates have constrained the flow of capital into the crypto market.
