Money managers are making inroads into the cryptocurrency market, driving prices up even as the SEC cracks down on emerging competitors.Only Photo via Getty Images
Cryptocurrency prices end a week on an uptrend in New York as the market benefits from intrusions from traditional financial players as the US government cracks down on leading pioneers in the digital asset industry.
According to CoinGecko, the value of all crypto tokens was around $1.25 trillion as of late afternoon, up nearly 12% for the week and 51% for the year. Market leader BitcoinBTC (BTC) traded at $30,889 and is up 2.5% over the past 24 hours and 20% on the week, while No.2 crypto ether (ETHETH) is up 0.8% Gained $1,901 and increased its seven-day gain by 14%.
Two forces seemed to be driving prices. First, it was announced last week that BlackRockBLK, the world’s largest asset manager, has applied for approval to list an exchange-traded fund (ETF) for spot market bitcoin. The Securities and Exchange Commission has repeatedly refused to accept such funds, although it allows futures-based ETFs, on the grounds that the latter are less prone to market manipulation. BlackRock has taken steps to make its SEC bid palatable, but when such a powerful company is bothering to prepare a listing in a new category after several competitors have been rejected, the time has probably come for the idea.
Evidence of this is the multitude of smaller ETF sponsors who quickly followed BlackRock and proposed their own spot Bitcoin funds, including InvescoIVZ, WisdomTree and Valkyrie Investments. Spot market ETFs could increase demand for Bitcoin by offering the convenience of stock trading for the kind of investors who are reluctant to engage in crypto wallets, seed phrases, and the risk of hackers. Collective investment funds managed by professional managers may be at odds with the individualistic philosophy of many early digital asset buyers — the “not your keys, not your cryptocurrency” kind — but that didn’t detract from the week’s gains.
The other development that supported the market was the announcement that EDX, an institutional cryptocurrency exchange, is going live. Backed by traditional financial heavyweights like Charles Schwab, Citadel, Fidelity, and Sequoia Capital, the exchange offers trading in four cryptos: Bitcoin, Ether, Litecoin, and Bitcoin Cash. What sets it apart from established competitors is that the company operates on a non-custodial model, which prohibits it from taking possession of the assets it lists.
“It appears that despite a troubled SEC, many of the biggest players in the US financial services pantheon are still very bullish on cryptocurrencies – planning new spot ETFs and making investments in ecosystem infrastructure,” said Bradley Duke, Co-CEO ETCETC Group exchange-traded crypto products in Europe, Forbes announced via email. “This has served to boost investor sentiment.”
The improved outlook comes after early June raids on Binance and Coinbase, the two largest cryptocurrency exchanges. The SEC filed civil lawsuits against both for operating as unlicensed exchanges and listing cryptocurrencies it considers unregistered securities, and also accused Binance of conducting “a multi-pronged plan to covertly circumvent US laws.”
The question of which cryptos are securities and which are commodities, and whether a single currency can be each at different times, remains unresolved, although bitcoin appears to be beyond the reach of the SEC.
Crypto prices fell in the days following the lawsuits, with the market value bottoming out at around $1.06 trillion on June 13. BlackRock news on June 15th sparked an upleg that gained momentum this week.
A big winner of the current surge is Bitcoin Cash, which is up 31% on Friday and 66% on the week. According to Greg Moritz, co-founder of crypto hedge fund AltTab Capital, Greg Moritz, co-founder of crypto hedge fund AltTab Capital, told Forbes via email that his inclusion in the first EDX listing was the catalyst for this surge.
“With the recent launch of institutional exchange EDX, Bitcoin Cash has been in the spotlight,” he writes. “The listing alongside BTC and ETH suggests that institutional players think BCHBCH is likely to be viewed as a commodity rather than a security. Accordingly.” There has been a spike in open interest as traders anticipate a significant inflow of institutional capital into BCH, a project that has previously had a rather bleak long-term outlook.”
Bitcoin Cash is based on the same blockchain as Bitcoin, but it can process transactions much faster. This makes it faster and cheaper to use, but at the expense of security.
LitecoinLTC, the fourth EDX-listed currency — which, like Bitcoin Cash, is an offshoot of Bitcoin — rose 5.4% on Friday and 19% on the week.
On Wall Street, crypto mining stocks have seen significant gains. Marathon Digital is up 7.4% for the day and 27% for the week, Hive Blockchain is up 7% (29%) and Hut 8 Mining is up 5% (27%).
Coinbase posted a 6.9% gain on the day and is up 11% this week. The stock market is also up 4.7% from where it was before the SEC complaint was announced on June 6th.
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