Bitcoin yo-yos on ETF regulatory approval

It’s been a volatile few sessions in the bitcoin space after Grayscale won a battle against US regulators last week.

The company, an asset management firm which holds roughly $17 billion in bitcoin, succeeded in a landmark case when a court ruled that the regulator was wrong to reject the firm’s application to convert its flagship product into a bitcoin-backed exchange traded fund.

A spot bitcoin ETF has become the “crypto holy grail” as it would allow consumers to trade bitcoin in a cheap, safe and well-understood regulatory product.

In effect, it would unlock the next phase of crypto adoption and see trillions of dollars of institutional capital come off the sidelines.

This would also shift the buying from unregulated crypto exchanges.

The price of bitcoin jumped over 8% at one point intraday on the Grayscale news, before closing more than 6% higher last Tuesday. The world’s most traded cryptocurrency settled above the widely watched 200-day simple moving average, currently at $27,558.

But as we warned last week, this capped the upside with prices falling sharply last Thursday by over 5% and back to the previous range played out since mid-August around $26,000.

The collapse came on the back of news that regulators had deferred approvals of the first US ETFs that invest directly in the cryptocurrency, killing investors hopes for a quickfire route to the world’s biggest capital market.

Numerous household retail fund managers like BlackRock, the world’s largest asset manager, Fidelity, Invesco and WidsomTree have been rebuffed with the SEC saying it needed more time to consider the applications.

The SEC has long justified its opposition to ETF products on the basis of market manipulation grounds and it is now expected to make its decision on spot bitcoin ETFs in the middle of next month.

It seems odd how the SEC can justify their rejection of ETF approval after accepting a previous proposal for future-based bitcoin ETFs.

Several crypto experts believe it is only a matter of time before SEC authorization, although price action has still been very much rangebound since the volatility.

The mid-June lows around $24,750/821 are next major support before big round numbers. We note the recent crossover with the 50-day moving average moving down below the 100-day moving average which could indicate the potential for a bearish move. Again, the 200-day simple moving average may cap the upside.