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The price of bitcoin has surged to its highest level in two years amid speculation that billions of dollars from institutional investors will soon enter the crypto market.
The world’s leading cryptocurrency faces a moment of reckoning as the US Securities and Exchange Commission (SEC) decides whether to approve the first wave of exchange-traded funds (ETFs) for bitcoin.
The long-awaited bitcoin spot ETFs would not only see a massive spike in demand, they would bring validation to the cryptocurrency as a mainstream and regulated asset. A rejection from the SEC, however, could cause the market to tumble.
Bitcoin reached above $47,000 on 9 January, representing a 10 per cent price rise since the start of 2024, though still a long way from its all-time high of $68,000 in November 2021.
The latest price rally follows a strong 2023, which saw bitcoin increase in value by more than 150 per cent against the US dollar.
The overall crypto market has also seen substantial gains over the last 12 months, with the combined market cap of all crypto assets rising by close to $1 trillion.
The SEC delayed its decision on Monday by issuing additional comments on the application, which some crypto market watchers took as a positive signal. Others warned that there could be further moves from the regulator to block their approval.
Prominent bitcoin advocate Perianne Boring wrote on X, formerly Twitter, that she was “worried the SEC has more tools at its disposal to block spot bitcoin ETFs from coming to market”.
Some crypto analysts have predicted that the impending SEC decision could send bitcoin shoot up in value by more than 300 per cent by the end of next year, provided the outcome is a positive one.
“If ETF-related inflows materialise as we expect, we think an end-2025 level closer to $200,000 is possible,” Geoff Kendrick, head of FX Research at Standard Chartered bank, wrote in a research note on Monday. “This assumes that between 437,000 and 1.32m new bitcoins will be held in spot US ETFs by end-2024.”
The SEC is expected to make its decision on the approval or rejection of the bitcoin Spot ETFs by 10 January, with up to 13 applicants set to have their fate decided on the same day to avoid favouring one with first mover advantage.
“We’re in for a massive week with one of the most significant events in crypto history taking place, the potential approval of a bitcoin spot ETF,” said Simon Peters, a market analyst at the online trading platform eToro.
“The consensus among the crypto community is that if these bitcoin spot ETF applications are approved, this could trigger the floodgates to open, as institutional investors who have to a degree have been frozen out of the crypto space can now get exposure via a regulated instrument.”
Others have warned that the bitcoin ETF could be a case of “buy the rumour, sell the news”, meaning even a positive decision from the SEC could precede a major sell-off.
“The market’s tumultuous nature is predominantly attributed to the imminent SEC decision on the approval or rejection of BTC Spot ETFs,” Matteo Greco, a research analyst at the digital asset investment firm Fineqia International, told The Independent.
“Elevated volatility correlates with increased trading volume, as evidenced by the trading volumes on centralised exchanges. Cumulative volume on centralised exchanges reached approximately $1.1 trillion in December 2023, marking the highest level since May 2022.”
