Bitcoin holds onto momentum after ‘dress rehearsal’ for possible spot ETF approval

Measum Shah

Bitcoin Businesses, DeFi & NFT

Bitcoin holds onto momentum after ‘dress rehearsal’ for possible spot ETF approval. Bitcoin’s price held onto momentum first seen yesterday after a false report about the supposed approval of a spot ETF had crypto markets buzzing. The world’s largest digital asset by market capitalization climbed 1.5% over the past 24 hours to $28,520 at 12:30 p.m. ET. Conversely, ether has slumped, down around 1% over the same period to $1,578, according to Coingecko. On Monday, a false report inaccurately asserted that BlackRock’s proposed spot bitcoin ETF had gained approval, causing a surge in trading activity and volatility. While Bitcoin pared gains after the report was debunked, it still ended the day higher than where it had started.

Analysts mostly saw the market activity ignited by the false report as a dress rehearsal for what would happen if a spot bitcoin ETF was approved. “Yesterday’s case showed us that the market is waiting for good news and ready for growth,” YouHodler Chief of Markets Ruslan Lienkha told The Block. “Spot bitcoin ETFs will be approved sooner or later, and market participants understand that.”

BlackRock sees ‘flight to quality’

This perspective was echoed by BlackRock CEO Larry Fink in an interview with Fox Business on Monday. He suggested the market reaction to the false report revealed “the pent-up interest in crypto.” According to Fink, there was more to Monday’s rally than the ETF rumor. He said it suggested a flight to quality spurred by fears of further global unrest. “I think more people are running into a flight to quality, whether that is in Treasuries, gold, or crypto, depending on how you think of it. And I believe crypto will play that type of role, as a flight to quality,” The BlackRock CEO added.

Fink’s appraisal of the situation was reinforced by a downturn in U.S. stocks in early trading on Tuesday, as rising bond yields once again weighed in on investor appetite for risk assets. The S&P 500 lost 0.2%, while the Nasdaq Composite slipped 0.4% and the Dow Jones Industrial Average fell 0.1%. In contrast, the 10-year U.S. Treasury yield topped 4.8%, suggesting investors are factoring in the prospects of tighter Federal Reserve monetary policy. The risk-off sentiment could be amplified if investors consider the economic impact of global unrest, particularly the war in Ukraine, and the Israel-Hamas conflict.

Bitcoin outperforming ether

According to Tuesday’s Deutsche Digital Assets report, performance dispersion among crypto assets continues to be relatively high, with bitcoin outperforming many major altcoins, including ether. Deutsche Digital Assets analyst André Dragosch said ether has continued to underperform bitcoin for a variety of reasons including the recent release of the BitVM paper by Robin Linus that suggests that “any computable function can be verified on bitcoin.” Dragosch suggested that the saturation in demand for ETH staking was another factor for the altcoin’s underperformance versus bitcoin.

“The size of the ETH entry queue has declined considerably, and that suggests the demand for staking is becoming saturated,” he said. “This suggests that staking yields may have found their equilibrium at around ~3.45% p.a.” According to Ruslan Lienkha, interest from mainstream media and institutional finance also explains Bitcoin’s recent tendency to outperform others. “Bitcoin is outperforming ether because we are in the process of a broader adoption of crypto among the general public, so it is quite logical that purchasing bitcoin is usually a new investor’s first move,” the YouHodler analyst said. “There are just a few investors who start from alternative coins.”

The Evolving World of Bitcoin and the Anticipation of Spot ETFs

Bitcoin, the pioneer cryptocurrency, has been at the center of numerous debates, innovations, and regulatory developments since its inception in 2009. As the digital currency landscape continues to evolve, the potential for a Bitcoin spot exchange-traded fund (ETF) stands out as a pivotal topic. The recent ‘dress rehearsal’ or preliminary preparations have raised significant excitement and speculation about the forthcoming decision. As we delve deeper into this subject, we will explore the implications of this ‘dress rehearsal’, Bitcoin’s sustained momentum, and the broader context of the spot ETF’s potential approval.

Understanding the Basics: What is a Bitcoin Spot ETF?

Before diving into the intricate nuances of the ‘dress rehearsal’, it’s imperative to understand what a Bitcoin spot ETF entails. A Bitcoin spot ETF tracks the actual price of Bitcoin and would involve the physical holding of the cryptocurrency. Unlike futures-based ETFs, which bet on future price movements, a spot ETF directly reflects the value of its underlying asset, in this case, Bitcoin. Its approval would mark a substantial milestone, signifying increased mainstream adoption and recognition of Bitcoin.

The Dress Rehearsal: Setting the Stage for the Main Event

The term ‘dress rehearsal’ in this context refers to the preparatory steps and test runs before the formal approval or introduction of the Bitcoin spot ETF. These preliminary exercises might involve simulated trading, technical setups, and regulatory compliance checks. It’s an indication that financial institutions, regulatory bodies, and market players are gearing up for the possible launch, thereby sparking heightened anticipation and speculation.

Bitcoin’s Momentum: Rising Prices and Renewed Enthusiasm

Parallel to the preparations for a possible spot ETF approval, Bitcoin has displayed robust momentum. The cryptocurrency has witnessed an upsurge in its price, buoyed by both retail and institutional interest. Many attribute this bullish trend to the optimism surrounding the ETF’s potential green light. Historically, the mere rumor or anticipation of significant regulatory shifts or adoption milestones has often led to substantial market movements. The current momentum reinforces Bitcoin’s resilience and the market’s appetite for positive developments.

The Broader Implications: Why a Spot ETF Matters

The approval of a Bitcoin spot ETF is not just another financial product launch; it carries broader implications for the crypto industry and traditional finance:

Mainstream Adoption: An ETF approval would undoubtedly bring Bitcoin to mainstream investors, offering them a regulated and more familiar avenue to invest in the cryptocurrency.

Increased Liquidity: The introduction of the spot ETF can potentially lead to an influx of capital into the Bitcoin market, boosting its liquidity and possibly stabilizing its price volatility.

Validation and Credibility: For a long, Bitcoin has faced skepticism from traditional financial players. A spot ETF’s approval would act as a nod of credibility, underscoring its potential as a genuine financial asset.

Potential Challenges and Concerns: Not All Rosy

While there’s palpable excitement, it’s also crucial to acknowledge the concerns surrounding a Bitcoin spot ETF. Critics argue about:

Given Bitcoin’s decentralized nature. There are apprehensions about the potential for price manipulations, which could impact the ETF’s stability. Some believe that the introduction of a spot ETF might trigger stricter regulations down the line. Especially if the product attracts massive interest. Relying heavily on the ETF as the primary vehicle for Bitcoin investment might overshadow other avenues, potentially centralizing what is inherently a decentralized asset.

Conclusion: An Unfolding Narrative of Innovation and Adaptation

Bitcoin’s journey, from a cryptographic experiment to a globally recognized digital asset. Is a testament to its adaptability and the evolving nature of finance. The ‘dress rehearsal’ for the potential spot ETF approval. The resultant momentum underscores the market’s readiness for change and innovation. While the road ahead might have its share of challenges. The unfolding narrative undoubtedly. Points towards increased integration of Bitcoin into the traditional financial fabric. The next chapters are shaped by regulatory decisions and market responses. Technological advancements, promise to be equally, if not more, captivating.


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