Bitcoin price churns under $37K as markets hold breath for ETF news

Bitcoin’s rally has largely been attributed to optimism that the SEC will approve a BTC ETF, but the real rally could come when the product hits the market

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Equities traded sideways while cryptos were mixed Friday morning, rounding out a tumultuous week for markets across the board. 

Bitcoin (BTC) gained as much as 1% Friday afternoon while ether (ETH) dipped into the red, posting a 1.6% loss. Stocks were trading almost completely flat, extending their sideways movement from Thursday. 

Bitcoin’s rally, which has seen the largest crypto gain close to 30% in the past month, has largely been attributed to optimism that the US Securities and Exchange Commission will soon green light a BTC exchange-traded fund. 

The speculation continued Friday when Bloomberg Intelligence ETF analyst Eric Balchunas posted on X that he’d heard the securities regulator has been in talks with exchanges regarding cash creates (where the ETF would accept cash for new shares rather than bitcoin), a narrative traders took to mean approval may be imminent. 

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The frenzy may have been premature — the SEC on Friday once again delayed its decision on an issuer’s proposed Ethereum product — but if and when a spot bitcoin ETF becomes a reality, traders have good reason to expect a price bounce. 

“There does seem to be a relationship between inflows as a percentage of [assets under management] and change in price,” CoinShares head of research James Butterfill said in a note Friday. “The highest inflows were witnessed when the prices were rising, suggesting many ETP investors are momentum trading.” 

Analysts from Galaxy are calling for 10% of American investors to put 1% into bitcoin ETFs within the first year, should the product make it to market, which would equate to inflows of $14.4 billion. 

“A spot ETF could be suited for any investor that wants direct exposure to bitcoin without having to own and manage the bitcoin through self-custody, offering numerous benefits over current bitcoin investment products,” Galaxy analysts wrote. 

Bitcoin ETP inflows have cooled since the bear market kicked off

Still, traders seem to have relaxed on front-running the news, at least for now. Macroeconomic conditions, whose impact on crypto markets continues to stump analysts, could also provide some favorable tailwinds for bitcoin and ether, should the assets behave as expected. 

The return of risk-on and big tech investing, trends that have historically pushed cryptos higher,  has fueled the Nasdaq’s more than 35% increase year to date. Matrixport analysts say the narrative is poised to continue. 

Researchers “predict further inflation decline in 2024, potentially prompting a significant interest rate cut by the US Federal Reserve,” analysts wrote in a note Friday. “This would fuel the ongoing rally in risk-on assets, including crypto. Similar to this year, the macro will also be a tailwind in 2024.”

Updated Nov. 18, 2023 at 5:50 am ET: Clarified reference to cash creates.


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