Positive impact on spot ETFs: Can Bitcoin return to the highs of two years ago?

Author: Zhao Yi, Hu Jinhua, Source: China Times

In the early morning of November 10, the cryptocurrency market once again started to carnival, and BTC once approached $38,000, an increase of nearly 8%. Subsequently, ETH also continued to rise, breaking through $2,100. However, the price of bitcoin has since retreated, as of press time, the latest price of bitcoin is $36670.8, down 0.08% in 24 hours, and the price of Ethereum is relatively stable, the latest price is $2110.66, down 0.48% in 24 hours.

The reporter noticed that the rise of bitcoin and other cryptocurrencies is still driven by the news of bitcoin and ethereum spot ETFs.

In this regard, Wu Gaobin, co-sponsor and executive vice president of the Web3.0 Special Committee of the Chinese People’s Association, told the China Times that the main driver of this round of Bitcoin price increase is the good news of spot ETFs. The launch of spot ETFs will help improve liquidity and transparency in the cryptocurrency market, attracting more institutional investors to the market. Therefore, in the short term, the positive impact of spot ETFs will still drive the crypto market to continue to rise. However, in the medium to long term, the market will return to fundamentals, and investors need to pay attention to industry developments and policy risks to judge how long the positive impact of spot ETFs can last.

Ethereum spot ETF may be one step ahead

According to Bloomberg analyst Eric Balchunas, the data shows that BlackRock’s iShares Ethereum Trust was successfully registered in Delaware, and BlackRock’s iShares Bitcoin Trust was registered in a similar manner seven days before filing an ETF application with the U.S. Securities and Exchange Commission (SEC). Eric believes that BlackRock has taken the first step towards applying for an Ethereum spot ETF.

The reporter learned that in addition to BlackRock, VanEck, Invesco, 21Shares and other companies have also applied for spot Ethereum ETFs.

Previously, Bloomberg analyst James Seyffart posted that starting on November 9, the SEC will open a short window that may approve all 12 spot Bitcoin ETFs, including grayscale GBTC, which will be open for at least eight days until the end of November 17.

On the same day, according to an article published by Coindesk, a person familiar with the matter revealed that the SEC has entered talks with Grayscale on the details of the company’s application to convert its trust product GBTC into a spot bitcoin ETF, which could have a significant impact on the crypto industry. Since winning the court case, Grayscale has been in contact with the SEC’s trading markets division, as well as the Corporation Finance division, both of which will play a role in developing and approving the company’s ETF filing, the person said.

In response to the news, Craig Salm, Grayscale’s chief legal officer, said: "At the moment we are just focused on constructive re-engagement with the trading markets department, and there are still some things that need to be resolved. Salm also noted that other applicants (BlackRock and Fidelity, among others) appear to have made progress in the SEC’s registration negotiations with their own.

Affected by the news, cryptocurrency prices have been in an upward mode since the evening of November 9. According to CoinGecko data, the total crypto market capitalization rose to $1.45 trillion, up 3.6% in 24 hours, a new high for the year. The total trading volume of the crypto market in the past 24 hours is about $140,171.7 million, of which BTC has a market share of 49.4% and ETH has a market share of 17.5%.

According to data from the Hong Kong Stock Exchange, as the price of ETH rose above $2,100, the share price of CSOP Ether Futures ETF rose rapidly after the opening and broke through HK$12, reaching HK$12.67 as of press time, an intraday increase of 11.24%, and the current AUM reached US$9 million. CSOP Ether Futures ETF is a sub-fund of the CSOP ETF family that, unlike traditional ETFs, invests primarily in CME Ether Futures.

“ETF expectations are the biggest catalyst for growth, which gives more momentum to the current rally,” said Josh Gilbert, market analyst at trading and investment firm eToro. He believes that in addition to the triggers for ETFs, the Fed has now stopped raising interest rates and the upcoming Bitcoin halving event next year has also contributed to the rally.

JPMorgan Chase & Co. expressed doubts about the sustainability of the recent surge in the crypto market, with JPMorgan analyst Nikolaos saying the crypto rally “looks excessive.” But it’s still uncertain whether crypto regulation will be loosened in the future, he said.

"Given the extent to which the cryptocurrency industry is unregulated, it is unclear whether the regulatory tightening in the sector will weaken significantly. "U.S. crypto industry regulations are still pending, and we don’t believe U.S. lawmakers will change their stance because of the two legal cases mentioned above, especially as the memory of the FTX fraud is still fresh in our minds. Nikolaos said.

In this regard, Yu Fenghui, a specially invited researcher at China’s financial think tank, told the China Times that the current round of rise in the cryptocurrency market may be stimulated by the good news of spot ETFs, but it is difficult to determine how long it will last. If the SEC approves these spot Bitcoin ETF applications, it could attract more traditional investors to the cryptocurrency market, further driving the market higher. However, the market rally is also influenced by a variety of factors, including market sentiment, global economic conditions, and policy changes.

Always be vigilant about risks

Recently, the news about Bitcoin spot ETFs has been stimulating the nerves of the crypto market. Compared to the pending spot ETFs, crypto futures ETFs are moving smoothly.

On October 9, 21Shares and ARK Invest announced that they will launch a new suite of digital asset ETFs, with a total of five ETF products. Leveraging on-chain signals and the crypto-native experience of both companies, these ETFs aim to achieve long-term capital appreciation through strategic investments in Bitcoin and Ethereum futures contracts and the application of blockchain technology. According to the prospectus, the ETFs will be listed on the Chicago Board Options Exchange (Cboe) and will begin trading next week.

In addition, according to official sources, the VanEck Ethereum Strategy ETF is now listed on the Chicago Board Options Exchange under the ticker symbol EFUT with a total expense ratio of 0.66%. According to reports, the VanEck Ethereum Strategy ETF (EFUT) seeks capital appreciation by investing in Ethereum futures contracts. The fund is actively managed and offers Ethereum-related investments through easy-to-use exchange-traded tools, and the fund does not invest directly in Ethereum or other digital assets.

The FTX-related case has just come to an end, but the market doesn’t seem to be more cautious. In the past, any news about spot ETFs has been able to drive volatility in the price of the currency. "Bitcoin is only halfway through its journey back to 2021, when it is close to its all-time high of $69,000, and it is still too early to be optimistic. A veteran cryptocurrency investor told the China Times.

"This is despite the fact that the news of ETFs has made investors frenzied about the cryptocurrency market. However, cryptocurrency investment still carries a high level of risk, and investors need to be cautious when participating in it. In Wu Gaobin’s view, when participating in cryptocurrency investment, investors should fully understand the market dynamics and assess their own risk tolerance to achieve steady growth of assets.

In this regard, Yu Fenghui also emphasized that cryptocurrency investment has high risks, including market volatility, manipulation risk, regulatory risk and security risk. Investors need to be clearly aware of these risks and do a good job of adequate investigation and risk management. At the same time, set reasonable investment goals and risk tolerance, formulate investment strategies according to personal circumstances, protect the safety of personal information and funds, and use safe and reliable trading platforms and wallets.