Volatility is one of the central characteristics of Bitcoin. This was demonstrated once again in spring this year when sudden negative headlines around the world's largest cryptocurrency exchange, Binance, caused the digital asset to suffer a marked correction in the middle of an upward trend. The company had repeatedly suspended Bitcoin withdrawals due to an unexpectedly sharp increase in transaction costs, making users nervous. Back at the end of March, investors withdrew USDbn 1.6 within the space of a few hours due to a lawsuit filed against the exchange by the US derivatives regulator CFTC. This did not damage the reputation of Bitcoin, however: indeed, the chaos at Binance actually brought the competition onto the scene. The brokerage Charles Schwab and asset managers Fidelity and Citadel, for instance, joined forces to launch the “EDX Markets” cryptocurrency exchange on 19 June with a view to offering investors a reliable alternative following the collapse of FTX and given the growing scepticism towards Binance.
Almost simultaneously with the launch of EDX Markets, speculation about the licensing of a listed Bitcoin ETF in the USA led to an upturn in the mood. The application was made by no less than the world's largest asset manager BlackRock. “This would have a signal effect for the whole world,” says analyst Timo Emden of Emden Research. BlackRock would like to cooperate on this with the Nasdaq and Coinbase. This gives Coinbase, which was recently targeted by the SEC, weighty backing. Ark Invest, Fidelity, VanEck and WisdomTree are among those also working with Coinbase in this sector. The new licence application triggered a rally in the oldest digital currency in the world, the cyber currency even crossing the USD 31,000 barrier to reach its highest level in a year.
Should trading in BTC spot ETFs abroad be allowed, this could bring a little calm back to the digital currency cosmos in general, with cryptos having recently been dominated by unfavourable reports. In February this year, for instance, the US financial authorities barred Binance from issuing new digital coins of the USD-linked Binance USD. A class action against Ripple, issuer of the cryptocurrency XRP, is also under way at the moment. This year, though, the bedrock Bitcoin managed to detach itself from these new “threats”. Confidence in this cyber currency appears to be strengthening little by little again. Since its interim low in mid-November 2022, when the price plunged below USD 16,000, the currency has more than doubled. Bitcoin has appreciated by somewhat more than 80% just since the turn of the year.
On the subject of confidence, this is also evident from the Bitcoin holdings of OTC desks, regarded as a proxy for institutional activity, which hit a 1-year high in June. “In our view, increased balances on OTC desks suggest that institutions and other large capital allocators are focused increasingly on Bitcoin,” wrote the experts of ARK Invest in a recent report. And since BlackRock applied for its spot Bitcoin ETF, the discount to the net asset value (NAV) of the Grayscale Bitcoin Trust (GBTC) has fallen from -40% to -30%. According to the investment company founded by star fund manager Cathie Wood in 2014, the narrowing discount suggests that the market could be pricing in the approval of a Bitcoin spot ETF – which increases the likelihood of the GBTC being converted into one. At the end of June, the crypto investment giant Grayscale filed an appeal against the SEC decision rejecting the conversion of the GBTC into a BTC spot ETF. What is more, nearly 70% of the 19.4 million bitcoins in circulation have not moved in at least one year or more, confirming a strengthening holder base. The quantity of Bitcoin held for a year or more has thus reached an all-time high in both relative and absolute terms.
Source: ARK Invest
