The crypto market has seen a sudden rally today 29 August after many days of sideways movement. As a result, Bitcoin’s price has jumped back to over $28,000 for the first time in weeks.
Bitcoin crashed below $30,000 a few weeks ago after it held the price level since March. The price has since dropped further to $25,000, leading to increased fear in the crypto market. The negative sentiment was worsened by the speech of Federal Reserve chair, Jerome Powell last Friday.
Powell in his Jackson Hole speech said the central bank was committed to bringing inflation down to 2%. This implied further monetary tightening, which could potentially affect risk assets such as Bitcoin and other cryptocurrencies.
Even prior to Powell’s speech, investors had started to abandon risk assets, causing Bitcoin to crash below $26,000, a level it has not been able to recover until today. Top crypto assets have also crashed alongside Bitcoin, but that has suddenly changed.
At the time of writing this report, Bitcoin has gained 7.28% in the last 24 hours, making it the highest gainer currently. This is followed by Ethereum at 5.47%. It appears investors at this time have gone for more stable assets like bitcoin and Ethereum rather than the more volatile altcoins.
Why Bitcoin is Soaring
Bitcoin is leading the current crypto rally, which is remarkable as it has performed poorly recently. This coincides with a court ruling today in favor of Grayscale against the SEC. A U.S. appeal court ruled for Grayscale to convert its Grayscale Bitcoin Trust into a spot ETF.
Following the ruling, over $76 million in cryptocurrency short positions were liquidated within, of which over $34 million short BTC positions were wiped out.
Judge Neomi Rao of the Washington D.C. The Circuit Court of Appeals had said in the ruling that “denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.”
Commenting on the ruling, General Counsel and Head of Global Policy for the Crypto Council for Innovation, Ji Kim said:
“Bitcoin’s immediate price surge post-ruling underlines the market’s anticipation and the profound impact such a decision holds,” Kim added. “As spot bitcoins ETFs are now closer to a potential launch, we’re witnessing real-time investor confidence in the crypto space amidst this court’s ruling.”
Spot Bitcoin ETFs on the Way
Grayscale applied to convert its Bitcoin trust to a spot bitcoin ETF in 2021. However, like the many other ETF applications, the SEC has denied it. Several other applications have been submitted this year, with much progress made.
With this ruling, Tim Bevan, CEO at ETC Group believes ETFs are finally getting approval in the U.S.
“We don’t believe the SEC will act as kingmaker and the most likely outcome is a block approval of applications that meet requirements, probably in Q1 ’24,” Bevan said.
“The level of pent up institutional and retail demand in the U.S. is significant and we expect this to have a positive impact on the price of bitcoin as can be seen from today’s price reaction, as well as further accelerate the global trend towards acknowledging crypto as a new asset class,” he added
The ruling is open for appeal by both the SEC and Grayscale within 45 days. If any of the parties appeals, this may take the case to the U.S. Supreme Court or an en banc panel review, for a rehearing with all three judges.