The entry of established money managers such as BlackRock and Fidelity into the cryptocurrency space is supporting price growth in spite of the SEC’s efforts to suppress competition from upstarts.
As the market gains from an intrusion by traditional finance players and the US government cracks down on prominent pioneers of the digital asset industry, cryptocurrency prices are capping off a positive week on a high note in New York.
As of late afternoon, report estimates that the total value of cryptocurrency tokens was approximately $1.25 trillion, up nearly 12% for the week and 51% for the year. The leading cryptocurrency, Bitcoin BTC (BTC), was trading at $30,889, up 2.5% over the previous day and 20% for the week. The second-ranked cryptocurrency, ether (ETH) ETH, increased by 0.8% to $1,901, extending its seven-day gain to 14%.
Prices appeared to be influenced by two factors. First, the world’s largest asset manager, BlackRock BLK, announced last week that it was requesting permission to list an exchange-traded fund (ETF) for spot-market bitcoin. Although the Securities and Exchange Commission permits ETFs based on futures, it has consistently declined to accept these funds, arguing that the latter are less vulnerable to market manipulation. BlackRock took steps to make its offering appear acceptable to the SEC, but the idea is most likely ready when a company that size makes the effort to get ready for a new category listing after several rivals have been rejected.
A number of smaller ETF sponsors, such as Invesco IVZ, WisdomTree, and Valkyrie Investments, swiftly followed BlackRock in proposing their own spot bitcoin funds, providing evidence in their wake. By providing the ease of stock trading to investors who are reluctant to deal with cryptocurrency wallets, seed phrases, and hacker risks, spot-market exchange-traded funds (ETFs) have the potential to increase demand for bitcoin.
The individualistic mindset of many early digital asset buyers—the kind who adhere to the “not your keys, not your crypto” slogan—may be at odds with collective investment funds managed by professional managers, but that did not stop this week’s gains.
The announcement of EDX’s opening for business—a cryptocurrency exchange for institutions—was the other development that helped the market. Enabled to trade four cryptocurrencies: bitcoin, ether, litecoin, and bitcoin cash, the exchange is supported by prominent figures in traditional finance such as Charles Schwab, Citadel Securities, Fidelity, and Sequoia Capital. By using a noncustodial business model that prevents it from assuming ownership of the assets it lists, it varies from established rivals.
In an email, Bradley Duke, co-CEO of ETC ETC Group, which offers exchange-traded cryptocurrency products in Europe, said that many of the biggest names in the U.S. financial services industry appear to be extremely bullish about cryptocurrency despite a fractious SEC. These companies are planning new spot ETFs and investing in ecosystem infrastructure. Investor sentiment has increased as a result of this.
The situation has improved since the two biggest cryptocurrency exchanges, Coinbase and Binance, were targeted in early June. In addition to accusing Binance of participating in a multi-step scheme to covertly circumvent US laws, the SEC filed civil complaints against both for operating as unlicensed exchanges and listing cryptocurrencies that it views as unregistered securities.
Although bitcoin appears to be outside the SEC’s purview, the question of which cryptocurrencies are securities and which are commodities, as well as whether a single currency can be both at different times, remains unresolved.
In the days that followed the lawsuits, cryptocurrency prices dropped, and on June 13 the market’s value reached a low of about $1.06 trillion. The news about BlackRock on June 15 sparked a rebound that grew stronger this week.
Bitcoin Cash is one of the main beneficiaries of the current upswing; it increased 31% on Friday and 66% this week. Greg Moritz, cofounder of cryptocurrency hedge fund AltTab Capital, told that the reason for its rise was that it was one of the first EDX listings.
He writes that Bitcoin Cash has gained attention due to the recent introduction of the institutional exchange EDX. The fact that BCH is listed alongside ETH and BTC indicates that institutional investors believe BCH will probably be regarded as a commodity rather than a security. As a result, open interest has increased as traders expect a sizable inflow of institutional capital into BCH, a project that has had rather dismal long-term prospects up until this point.
Despite being built on the same blockchain as bitcoin, bitcoin cash can process transactions far more quickly. This increases its usability and reduces costs, but it may also compromise security.
The fourth cryptocurrency listed on the EDX, Litecoin LTC, is an offshoot of bitcoin and was up 5.4% on Friday and 19% for the week.
Wall Street saw significant gains in cryptocurrency mining stocks. Hive Blockchain gained 7% (29%) and Hut 8 Mining 5% (27%), while Marathon Digital was up 7.4% for the day and 27% for the week.
With a weekly gain of 11%, Coinbase recorded a daily gain of 6.9%. Additionally, the exchange has increased by 4.7% from its June 6 closing price prior to the SEC lawsuit.
