Crypto markets are enjoying a nice bounce in recent trade, with sentiment boosted by the news that BlackRock has just filed paperwork to create a Spot Bitcoin Exchange Traded Fund (ETF).
Bitcoin (BTC) was last up around 2.5% in the last 24 hours in the $25,600s, as per CoinMarketCap.
Ether (ETH) was last up around 1.6% in near $1,670, XRP (XRP) was up 1% just above $0.48, Cardano (ADA) was up 1.5% around $0.265 and Solana (SOL) was up around 4.5% just under $15.
The fund’s assets would “consist primarily of bitcoin held by a custodian on behalf of the Trust”.
BlackRock, the world’s largest asset manager with assets under management (AUM) in excess of $10 trillion, has been working with Coinbase for nearly a year on making digital assets more readily available for institutional investors.
Indeed, according to earlier media reports, BlackRock plans on using Coinbase’s Custody solution for its ETF.
A Spot Bitcoin ETF Could Substantially Boost BTC Demand
The SEC has so far rejected previous bids made by companies including Grayscale, WisdomTree and VanEck to form a spot bitcoin ETF, citing a lack of regulation on cryptocurrency exchanges were spot bitcoin is generally traded.
The SEC and Grayscale remain engaged in a protracted lawsuit regarding the SEC’s refusals to approve the latter’s spot bitcoin ETF applications.
But the SEC has approved bitcoin futures ETFs.
And analysts think that the SEC will have a tougher time saying no to BlackRock, given its massive sway in financial markets and its huge political influence.
If the SEC is bulldozed by BlackRock into approving its first spot bitcoin ETF, this would be a huge milestone for bitcoin regarding its institutional and broader adoption.
A spot ETF would offer institutional investors an easy way to gain exposure to bitcoin without having to actually directly own or trade the underlying asset.
A recent survey by financial services firm Brown Brothers Harriman revealed a majority of institutional investors are “extremely interested” in crypto ETFs.
A spot bitcoin ETF would likely attract substantial inflows that could add significant additional demand for the underlying asset.
How High Can the Bitcoin (BTC) Price Go?
Bitcoin bulls will be hoping that the prospect of renewed demand from institutions (if BlackRock’s spot bitcoin ETF is approved) can prevent the cryptocurrency from breaking key support in the short term.
Prior to the BlackRock news, the BTC price was probing for a breakout below long-term support in the mid-$25,000s, as well as for a possible breakout below an uptrend that has been in play since late-2022.
A break below this key support zone could have opened the door to a retest of the 200-Day Moving Average at $23,700, or even a retest of the March lows under $20,000.
Bitcoin’s recovery to the $25,600 area will ease these fears for now.
But the market remains in a downtrend since topping out in April above $31,000.
The SEC’s recent enforcement action against Coinbase and Binance and labeling of many cryptocurrencies (though not bitcoin) as securities continue to weigh on sentiment.
So do macro headwinds, with the Fed this week communicating at its latest policy announcement that it expects interest rates to remain in the mid-5.0% range at least through the end of the year.
To stand a chance at getting back to yearly highs above $30,000, BTC needs to muster a breakout above its 50 and 100DMAs and the downtrend from yearly highs, all of which reside in the $27,000s.
In the current market environment, its difficult seeing this happening.
Given the SEC’s resistance to BlackRock’s spot bitcoin ETF proposal is sufficient, the asset management giant could easily pull its application, bitcoin bulls should try not to get ahead of themselves.
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