What looked set to be a down day for bitcoin is turning positive, courtesy of renewed speculation that the U.S. could soon approve exchange-traded funds (ETF) on futures linked to the top cryptocurrency.
Bitcoin has gained 4.5% to trade near $43,400 one day after exhibiting bearish price action. The cryptocurrency failed to keep gains above $42,000 on Wednesday, hinting at further weakness.
However, the cryptocurrency picked up early today, possibly in response to the U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler reiterating support for a narrow class of bitcoin ETFs that would invest in futures contracts instead of buying the cryptocurrency directly. “There is some newfound optimism around the launch and approval of an ETF in the U.S,” said Matthew Dibb, COO and co-founder of Stack Funds.
Canada’s decision to approve a multi-cryptocurrency ETF that holds bitcoin and ether may have added more impetus to the advance. The U.S. SEC’s final verdict on several bitcoin ETF applications and a first response on futures-based ETFs is due next quarter.
The consensus in the crypto market is that an ETF would become the most important source of demand from yield-hungry institutional and traditional market investors. The first gold-backed ETF in the U.S., the SPDR Gold Trust, was launched on Nov. 18, 2004. Since then, the metal’s price has developed a strong link with the SPDR trust flows.
Data from ByteTree Asset Management show bitcoin ETFs and funds currently own around 801,000 BTC, amounting to 4.3% of the total supply. “Holdings ballooned from 250,000 in 2019 to 800,000 today and helped drive the bitcoin bull market from $5,000 to $64,0000, before flattening off,” ByteTree Asset Management’s CIO Charlie Morris said in the latest ByteTree Market Health Update published Wednesday.
The ETFs have amassed just over 3,000 bitcoin over the past four weeks. Blockchain data shows large traders have accumulated coins during the recent price dip in a sign of confidence in bitcoin’s broader bull run.
Stack Funds’ Dibb said, “We are experiencing some end-of-month buying before the quarter is closed. We may see this continue over the next few days as funds take on new investor subscriptions.”
The bullish sentiment is also evident from thick bids stacked around $40,000 on crypto exchange Bitfinex, as analyst Cole Garner tweeted.
However, prospects of tighter Federal Reserve policy, the U.S. debt uncertainty, and the ongoing dollar rally could cap gains.
The 60-day rolling correlation between the greenback and bitcoin has dropped to -0.33, the strongest negative reading since March, according to CoinDesk 20 data.
The dollar index, which tracks the greenback’s value against major fiat currencies, rose to a 12-month high of 94.40 early today, tracking a rise in the U.S. Treasury yields.
All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
Recommended Content
Editors’ Picks
Ripple's XRP set sights on $1.100 following renewed investor interest
Ripple's XRP rallied nearly 20% on Tuesday, defying the correction seen in Bitcoin and Ethereum as investors seem to be flocking toward the remittance-based token.
Dogecoin Price Prediction: Could DOGE ETF spark new all-time high after 130% rise?
Dogecoin rose over 15% on Tuesday as traders anticipate a price move toward the $1 threshold following Bloomberg analyst Eric Balchunas's post regarding a DOGE exchange-traded fund.
Hedera's HBAR rallies nearly 20% as Canary Capital files for HBAR ETF
Hedera's HBAR is up nearly 20% on Tuesday as Canary Capital submitted an S-1 registration to the US Securities & Exchange Commission for an HBAR exchange-traded fund.
Ethereum Price Forecast: ETH down despite hype from Beam Chain unveil
Ethereum is down 1% on Tuesday despite developer Justin Drake proposing the Beam Chain, a new consensus layer that aims to ship a series of changes that will fast-track the Main chain's roadmap to faster block times and quantum resistance.
Bitcoin: Further upside likely after hitting new all-time high
Bitcoin hit a fresh high of $76,849 on Thursday as crypto-friendly candidate Donald Trump won the US presidential election. Institutional demand returned with the highest single-day inflow on Thursday since the ETFs’ launch in January.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.