Bitcoin, the world’s largest digital asset, experienced consolidation after briefly surpassing $47,000, fueled by optimism surrounding the potential approval of the first US exchange-traded funds (ETFs) directly investing in the cryptocurrency.
The token retraced to $46,739 in London as of 6 a.m. on Tuesday, following a 6.5% surge on Monday that propelled it to a 21-month high.
Bitcoin’s New Year ascent has reached 10%, in stark contrast to declines observed in stocks and gold over the same period.
The crypto market is eagerly anticipating regulatory approval for US-spot Bitcoin ETFs by the looming January 10 deadline.
Key players like BlackRock Inc., Fidelity Investments, and Ark Investment Management have updated their paperwork with the Securities and Exchange Commission (SEC), which has until Wednesday to decide on at least one of the applications.
Speculators are betting on the SEC announcing multiple decisions simultaneously to avoid providing a first-mover advantage.
If approved, the next point of interest is gauging the amount of capital these ETFs will attract. Bitcoin’s impressive 172% surge over the past 12 months signals traders’ anticipation of broader token adoption.
Market participants are increasingly optimistic about the potential success of these ETFs, with Kyle Doane, a trader at Arca, noting that initial flows could exceed expectations.
Spot Bitcoin ETF Approval Sparks SEC Debate
On Monday, applicants made final amendments to their forms in the US, marking the last push to introduce spot Bitcoin ETF products, more than a decade after the initial attempt.
Despite SEC Chair Gary Gensler’s concerns about fraud and misconduct in the crypto space, the agency lost a significant legal battle against Grayscale Investments LLC last year, fueling speculation that it may have to concede to the introduction of spot ETFs.
Critics, however, argue that spot crypto ETFs pose risks for investors due to the inherent volatility and potential for illicit activities in the digital asset space.
Dennis Kelleher, CEO of financial reform nonprofit Better Markets, expressed concern that many Americans might face financial harm.
While Bitcoin’s months-long rally has had a positive ripple effect on the broader digital asset market, including smaller tokens like Solana and Avalanche, questions arise about a potential pullback when SEC approval materializes.
Some market analysts suggest that the $51,000 level could be a target before any significant retreat.
Looking beyond short-term fluctuations, approval of a Bitcoin spot ETF is expected to significantly enhance Bitcoin’s visibility, driven by major names in traditional finance.
In 2021, the cryptocurrency experienced a bull run that resulted from historically low borrowing costs, reaching an all-time high of almost $69,000.