Bitcoin rises to 17-month high as ETF optimism soars

Here's how you can access the Editor's Digest for free Are you interested in accessing the Editor's Digest at no cost? If yes, then continue reading to find out how.

Each week, Roula Khalaf - the FT's editor - handpicks her preferred tales and presents them in this newsletter.

On Tuesday, Bitcoin reached its highest level in 17 months. This comes after a significant drop in value last year, but now there is growing hope that the US government will permit the launch of stock market funds that invest in Bitcoin.

In the previous 24 hours, the value of the digital currency elevated by a whopping 10 percent and reached $35,000 per token. Traders' assurance in the Securities and Exchange Commission's approval of an exchange-traded fund in the upcoming months resulted in this confident attitude towards the digital currency.

The significant increase in value has enabled bitcoin, which is the original and most commonly traded cryptocurrency, to recover from the negative impact it experienced after the collapse of Terra's stablecoin in May.

The sudden decline of Terra led to a crisis of trust that had never been seen before. Many well-known companies, including Celsius and Sam Bankman-Fried's FTX exchange, crumbled as a result.

The sharp rise of Bitcoin is caused by expectations that the SEC will change its previous policy of rejecting spot ETFs containing Bitcoins after ten years. Several significant players on Wall Street like BlackRock and Franklin Templeton have filed with the SEC, along with VanEck and WisdomTree.

According to Ilan Solot, who is the co-head of digital assets at Marex, a broker based in London, the approval of a bitcoin ETF application by the SEC would acknowledge bitcoin as a legitimate asset class equal to all other types of assets.

He mentioned that this could potentially put an end to uncontrolled and unregulated organizations monopolizing the crypto industry. With the participation of significant institutions, there would be a sense of legitimate interest in the sector.

According to proponents of cryptocurrency, these funds provide an economical and secure method for individuals to engage in the token's trade, in contrast to purchasing it directly from uncontrolled cryptocurrency markets.

The SEC has stated it is incapable of providing confidence to investors regarding the lack of susceptibility to manipulation in the bitcoin market.

Since the summer, the regulatory body has faced mounting pressure following a court ruling in Washington. The court ruled that the agency was mistaken in its decision to deny asset manager Grayscale's request to transform their leading product, the Grayscale Bitcoin Trust, into an ETF.

According to traders, the increase in value on Tuesday was due to the inclusion of BlackRock's forthcoming bitcoin ETF on the primary clearing house of the United States securities market.

Several days later, BlackRock – the leading global asset management company – filed an updated statement announcing the potential purchase of shares in the ETF by an anonymous investor. This is a typical action taken by new or developing ETFs to obtain additional funds.

Michael Silberberg, who is in charge of investor relations at Alt Tab Capital, stated that there is a growing agreement that the SEC will give their approval to several types of Bitcoin spot ETFs. This news is being reported on a daily basis.

Investors are arranging themselves for a possible surge in the value of bitcoin if the ETF gets the green light. In recent times, its value increased by over 8% when unfounded speculations circulated on social media that BlackRock's application had been granted.

According to CoinShares, an investment company, digital asset funds have received investments totaling $179 million in the last four weeks. The reason for this is probably due to the enthusiasm surrounding a spot bitcoin ETF.

The blog post mentioned that the amount of money being put into the funds was not as high as the $807mn that was put in over a four week period after BlackRock initially filed in June of last year. This could mean that investors are being more careful this time, as stated in the blog's research note.

The SEC will announce its initial decisions regarding the ETF filings in the beginning of the following year.