Regulatory Yo-Yo Revives Volatility

by Alex Benfield
By Alex Benfield

Even though 2023 has largely been marked by subdued market volatility, it hasn't been short of headline-grabbing events. 

Indeed, this year has been punctuated by regulatory challenges, revitalized institutional participation and pivotal court victories. 

And just as we thought the cryptocurrency market had hit a quiet patch, a significant news story stirred things up, causing a noticeable uptick.

To be specific, yesterday, we received news that Grayscale won its lawsuit against the Securities and Exchange Commission. 

You see, Grayscale wanted clarity as to why its application to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin (BTC, “B+”) ETF was denied … but the SEC offered no explanation.

As such, the courts ruled that the SEC’s judgment was “arbitrary and capricious,” which essentially means there was no clear reason why the SEC denied the application. 

Now, this is a huge triumph for Grayscale, as it dramatically increases its chance to convert GBTC into an ETF. But it’s also a victory for the crypto regulatory landscape as a whole. 

With this win, the chances of an approval of a spot Bitcoin ETF have significantly increased. Even Bloomberg is reporting that the SEC could approve BlackRock’s (BLK) ETF as soon as this week!

I’ve already covered in detail why the approval of a spot Bitcoin ETF would be such a big deal for the crypto market. 

But here are two key things to keep in mind: A spot BTC ETF approval could increase Bitcoin’s exposure to a newer, wider audience, and provide validity to not just BTC, but the broad crypto market. 

Generally, ETFs appeal to a much larger audience because they are relatively inexpensive, provide an excellent way to diversify your portfolio and tend to be less risky than individual stocks. 

However, if you want to invest in ETFs, you need a brokerage account. And people that choose to invest through financial advisors and brokerages don’t typically like to venture off and make their own investments.

So, it’s no surprise that these people haven’t really had easy access to Bitcoin or crypto before — at least not through an investment vehicle as attractive as a BlackRock-approved spot ETF.

In fact, many financial advisors and investment managers have actually been prohibited from offering crypto exposure to their clients for years. But that should change with a large ETF product with BlackRock’s name on it. 

Turning to price action, the Grayscale court ruling caused an immediate — but mild — pump in BTC’s price, allowing it to climb about 6% in mere minutes.

Currently, BTC is back to trading around the $27,000 level, which has acted as both support and resistance so far this year. 

Although it was reassuring that the news had a positive impact on prices, it was a little disappointing that Bitcoin couldn’t climb higher. On top of that, prices are down a bit today.

However, if the rumors of an ETF approval coming as early as this week are true, this rally could keep on climbing. 

Source: Coinbase (COIN).
Click here to see full-sized image.

 

Meanwhile, Ethereum (ETH, “B”) shot up about 5% in reaction to the Grayscale news. But right now, it’s trading around $1,700 again.

More importantly, yesterday's pump caused ETH to bounce off its 200-week moving average — a key level in determining a long-term bullish or bearish sentiment.

For now, we’ll be watching to see if ETH can hold on to $1,700. But the more important test is to see whether it can climb back above $1,800 and into its previous trading range.

Source: Coinbase.
Click here to see full-sized image.

 

As this ETF saga continues to unfold, it’s likely that Ethereum and the rest of the altcoin market will be overshadowed by Bitcoin.

Without renewed retail interest, it will be difficult for altcoins to steal the spotlight from Bitcoin. 

What’s Next

In the immediate aftermath of the Grayscale court ruling, the crypto community can bask in a ray of optimism. 

After all, the regulatory landscape's positive shift suggests a favorable short-term horizon for crypto prices, especially with the increased buzz surrounding an imminent ETF approval. 

This approval could be a game changer, providing a much-needed boost for Bitcoin and, subsequently, the broader crypto market. Going forward, investors can anticipate some market activity and even a potential rally.

However, while these developments bring short-term enthusiasm, it's crucial to manage expectations. 

The anticipated bull market — marked by consistent high growth and sustained positive momentum — is not on the immediate horizon. With the current ebbs and flows, the market may maintain a neutral stance over the next few months.

But there's a silver lining. As history has often shown, patience can reap rich rewards in the crypto realm. 

Come early next year, the signs point to the onset of a massive bull market. Such transformative phases don't merely represent heightened market activity but they redefine investment landscapes. 

For now, while the market navigates through its current phase, investors are advised to stay tuned, stay informed and most importantly, stay patient.

Best,

Alex

About the Crypto Analyst

Alex has been actively researching and investing in cryptocurrencies since 2017. He contributes research and reports to several Weiss crypto publications, with a primary focus on helping to create crypto trading strategies.

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