What’s Behind Bitcoin’s Latest Rally? Little consensus and a lot of noise

The world’s largest cryptocurrency began climbing late last week after spending much of the summer stuck around $26,000. It surpassed $30,000 over the weekend, briefly topped $35,000 in recent days to reach its highest level since May 2022, and is now hovering around $33,800.

As is the case with most debates in the crypto world, there is little consensus on what is behind this sudden surge.

Some crypto bulls are pointing to signs that a series of exchange-traded funds holding real bitcoin, known as bitcoin spot ETFs, will soon be approved by U.S. regulators. This would allow investors to buy and sell bitcoin through a brokerage account as easily as stocks.

“There is a lot of pent-up demand for these products,” said Matthew Sigel, head of digital asset research at VanEck, which is one of a dozen asset managers with a pending Bitcoin ETF application at the cash.

Others credited Rep. Tom Emmer’s bid to become speaker of the crypto advocate’s House of Representatives for Bitcoin’s latest rally. But even after its withdrawal from the competition, bitcoin continued to climb.

Another popular theory is related to the upcoming bitcoin “halving,” a blockchain adjustment that literally halves the reward miners receive for processing transactions and creating new bitcoins. Crypto enthusiasts say the token can be considered a store of value with a limited supply. .

“People from all walks of life are looking for reasons to believe,” said Bobby Zagotta, chief executive of crypto exchange Bitstamp USA. “They’re looking for signs of health in this market.”

The only things that are sure? Bitcoin is a very volatile and speculative investment, subject to large price fluctuations. After a calm summer, marked by low volatility and low trading volumes, the market seems to have come out of its torpor.

Here’s how Bitcoin’s latest surge is impacting the crypto industry:

Crypto Stocks

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The rally helped boost crypto-related stocks and other tokens.

Shares of Coinbase Global rebounded Monday and Tuesday before giving up gains. The stock has doubled in 2023 but is down 80% from its 2021 high. Coinbase is listed as a custodian on several asset managers’ applications in the Bitcoin ETF spot race. The exchange would be responsible for custody of the bitcoin and would receive a fee based on the total value of the fund’s assets.

Despite the stock rally, the outlook for Coinbase is bleak. The SEC sued the company in June, saying it violated rules that require it to register as an exchange and be supervised by the federal agency. The company is expected to report third-quarter results on Thursday.

Other stocks on the move include MicroStrategy, a software intelligence company that holds more than 150,000 bitcoins. Shares have gained 17% over the past week. Bitcoin miners Marathon Digital and Riot Platforms jumped 14% and 7.6%, respectively.

Other tokens including ether, dogecoin and solana also climbed.

Bitcoin Trust in Grayscale

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The $21 billion Grayscale Bitcoin Trust, the world’s largest Bitcoin fund, is also seeking approval to convert to a spot Bitcoin fund. It currently trades at a 16% discount to the underlying value of the bitcoin it holds, down from 42% in mid-June and almost 50% at the end of last year, according to YCharts. Crypto enthusiasts see the narrowing gap as a bullish indicator of its chances of approval.

An appeals court in August ordered the SEC to reevaluate Grayscale’s application and either approve or deny it on new grounds.

Shares of the fund rose 6% last week and are expected to more than triple in 2023.

CME Bitcoin Futures

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Although individual investors appear to have fueled the recent rally, institutional interest in Bitcoin futures has also been steadily increasing. The number of unsettled and active Bitcoin futures contracts traded on the Chicago Mercantile Exchange, known as Open Interest, hit a record high of more than 20,000 contracts on Monday.

Open interest on the CME, a venue favored by large investors, was equivalent to 100,000 bitcoins with a notional value of $3.4 billion, according to the CME.

Bitcoin trading volume

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Bitcoin spot trading volumes have recovered after falling to their lowest levels of the year in September. Higher volumes tend to translate into stronger liquidity, meaning investors have a better chance of trading bitcoin quickly at listed prices.

The rebound helped Bitcoin regain its dominance in the crypto market. Bitcoin’s market value stands at around $660 billion, accounting for more than half of the total $1.25 trillion crypto market. At nearly $34,000, bitcoin’s price has more than doubled this year and halved from its peak of nearly $69,000 in November. 2021. A return to May 2022 levels brings bitcoin back to where it was trading before the $40 billion wipe of a cryptocurrency pair, the bankruptcy of several crypto lenders and the fall of the FTX exchange .


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