In a Manhattan courtroom this month, the cryptocurrency industry faced a reckoning when its former star, Sam Bankman-Fried, was found guilty of fraud in a trial that exposed the industry’s excesses.
But the ever-volatile cryptocurrency markets were already moving forward.
Shortly before Mr. Bankman-Fried’s verdict came on Nov. 2, the price of bitcoin surpassed $35,000, its highest level since the industry’s collapse in 2022. Last week, Ether, the second-largest digital currency most popular, rose 10 percent to around $2,100. , its best performance in months. Some investors were quick to declare an end to the so-called crypto winter of falling prices and financial scandals that have plagued the industry for the past 18 months.
Driving renewed euphoria? A potential new fund.
Cryptocurrency investors are increasingly optimistic that the Securities and Exchange Commission will approve an exchange-traded fund, or ETF, that tracks the price of bitcoin, analysts said. The fund would list on traditional stock exchanges and offer an easy way for people to invest in cryptocurrencies, which could bring a wave of money to the industry.
Some advocates have praised the possibility of this new investment vehicle, known as a bitcoin spot ETF, as crypto “salvation.” In August, Grayscale Investments, a crypto asset manager, won a legal victory over the SEC that appeared to pave the way for offering the bitcoin product. And last week, BlackRock, a giant money manager, filed paperwork to establish a similar ETF to track the price of Ether.
These new funds “could represent a milestone,” said Michael Sonnenshein, CEO of Grayscale. “We’re already starting to see quite a few signs of the melting of crypto winter.”
The cryptocurrency industry has been craving good news since last year’s market crash, which wiped out billions of dollars in savings virtually overnight. But the approval of a bitcoin ETF is not guaranteed and some analysts have crypto-market-rally-looks-overdone-jpmorgan-says/” title=”” rel=”noopener noreferrer” target=”_blank”>put on doubt on whether it would attract many new investments into the world of cryptocurrencies.
The obsession with the new fund also underlines the extent to which cryptocurrencies have moved away from their anti-establishment roots. bitcoin was created 15 years ago as an alternative to the traditional financial system and a tool to undermine powerful Wall Street interests. Now some bitcoin enthusiasts celebrate giant financial firms like BlackRock as the saviors of the industry.
“The hypocrisy is just maddening,” said John Reed Stark, a former SEC official and outspoken critic of the crypto industry. “It is anathema to know why bitcoin was created in the first place.”
An ETF is essentially a pool of assets divided into shares that investors can buy and sell on the open market. Instead of purchasing bitcoin directly through a crypto exchange like Coinbase, investors in a bitcoin ETF would own shares of a fund containing the cryptocurrency, eliminating the need to worry about storing bitcoin in a digital wallet.
Cryptocurrency advocates have sought a bitcoin ETF for more than a decade. In 2017, the SEC denied an ETF application from crypto entrepreneurs Cameron and Tyler Winklevoss, who had been working on the project for years.
The industry continued to struggle. In 2021, the SEC approved ETFs that bet on future bitcoin prices without owning the currency itself. But the agency rejected an attempt by Grayscale to introduce the first ETF linked directly to bitcoin, arguing that crypto markets were subject to manipulation and other risks to consumers.
Grayscale bitcoin-fund-into-etf-11656617147″ title=”” rel=”noopener noreferrer” target=”_blank”>challenged the SEC in federal court in June 2022. The legal battle ended in August of this year, when a panel of judges ruled in favor of the company, considering the SEC’s actions “arbitrary and capricious.”
Since that ruling, two key offices within the SEC that oversee the ETF application process have worked with companies that want to create bitcoin ETFs, three people familiar with the matter said. The agency’s stance has fueled optimism, two of them said, because regulators are asking detailed technical questions that suggest the process has reached an advanced stage. (Some aspects of the conversations were bitcoin-etf-push/” title=”” rel=”noopener noreferrer” target=”_blank”>previously reported by CoinDesk.)
An official approval could come as early as January, according to Bloomberg analysts bitcoin-etf-push-what-s-next-after-sec-doesn-t-appeal-court-ruling?sref=zVYYYI5e” title=”” rel=”noopener noreferrer” target=”_blank”>foretold. Grayscale’s Sonnenshein said he had seen a high “level of understanding and commitment” from the SEC.
“For us, it really remains a question of when, not if,” he said.
An SEC spokesman declined to comment.
Gray scale is one of bitcoin-etf-products-gensler-2023-10-26/” title=”” rel=”noopener noreferrer” target=”_blank”>various signatures looking to offer crypto ETFs Fidelity, the asset manager, has a bitcoin-exchange-traded-fund/” title=”” rel=”noopener noreferrer” target=”_blank”>pending request for a bitcoin fund. BlackRock has applied to create its own bitcoin ETF, as well as the one linked to Ether. Cryptocurrency investors hope that the approval of bitcoin and Ether ETFs will bring billions of dollars of new money to the industry.
Skeptics abound. JP Morgan analysts released a report last week calling the recent rise in cryptocurrencies “overblown” and argued that approving an ETF would simply redistribute capital that traders have already invested in the industry, rather than attracting new ones. investments. crypto ETFs trading in Canada and Europe “have garnered little interest from investors since their inception,” according to the report.
But the enthusiasm in the cryptocurrency markets has not diminished.
On Monday, cryptocurrency news website The Block reported that BlackRock had applied to introduce an ETF that would track the price of XRP, a digital currency that has been the subject of years of litigation between its issuer, Ripple, and the SEC
XRP Price crypto-traders/#:~:text=A%20regulatory%20filing%20suggesting%20the,price%20of%20around%2065%20cents.” title=”” rel=”noopener noreferrer” target=”_blank”>leap by more than 10 percent. Cryptocurrency fans celebrated on X, the website formerly known as Twitter.
But the news was not true: an unknown trickster had presented FAKE documentation that included the name of one of the BlackRock executives.
