This Bitcoin rally is not due to technicals, will stay above $30,000 (BTC-USD)

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Olemedia

Bitcoin (BTC-USD) breached and ended the week above the psychological level of $30,000 per coin on recent developments signaling new investment from traditional finance giants in the largest decentralized token by market capitalization . Heavyweights Fidelity National Financial (FNF) and Charles Schwab Corporation (SCHW), along with Citadel Securities, one of the largest designated market makers, launched the EDX exchange on June 20. BlackRock (BLK) already operates a private Bitcoin spot trust, but like EDX, it is restricted to institutional clients. The cash ETF offered by BlackRock for retail investors will likely be the first to succeed in the United States. Eric Balchunas, senior ETF analyst at Bloomberg, tweeted BlackRock’s 575-1 record for ETF approvals from the SEC. Continued adoption and endorsement by large organizations can only drive up the demand and prices for BTC.

The spot ETF offered by BlackRock filed on June 15 has nothing to do with the Grayscale Bitcoin Trust (OTC: GBTC). ETF investors buy shares that represent ownership of a fund that holds Bitcoin and does not directly own the underlying Bitcoin. GBTC investors buy shares of the trust which represent a direct stake in the BTC held by the trust, currently at 0.00090534 BTC per share. GBTC shares are trading at a steep discount to their net asset value (NAV). This narrowed from June 23, when a share of GBTC’s market value soared to $19.19 from $17.72 the previous day, even though the amount of Bitcoin held per share rose to 27. $94. Normally, stocks trade at a discount to their net asset value during times of low demand or negative market sentiment.

However, the “GBTC discount” has deteriorated as the fund does not allow redemptions; investors can only sell their shares on the secondary markets. Institutions or accredited individuals who have the ability to create and redeem GBTC shares can leverage this discount by buying GBTC shares at a lower price and exchanging them for Bitcoin at NAV. A normal ETF uses a create and redeem mechanism to prevent its shares from trading at such a large discount or premium, thereby keeping prices in line with the underlying net asset value.

The Securities and Exchange Commission (SEC) rejected Grayscale’s application to convert GBTC to a Bitcoin ETF in the cash market on June 29 last year because, in its analysis on page 83, “the Commission must approve a proposed rule change [to list and trade shares of GBTC] if it concludes that the proposed rule change complies with the applicable requirements of the Exchange Act – including the requirement … that the rules of a national securities exchange be designed to prevent fraudulent acts and practices and manipulators – and he must disapprove of the filing if he does not make such a conclusion.” On the same day, Grayscale sued the SEC for its arbitrary decisions by continuing to approve ETFs based on Bitcoin futures, while refusing all spot Bitcoin ETFs to date.

BlackRock is not like a Bitcoin futures ETF such as ProShares Bitcoin Strategy ETF (BITO). BITO holds futures contracts, or agreements to buy or sell Bitcoin at a pre-determined price on a future date, so an investor’s exposure is to Bitcoin’s anticipated price movements. Unlike spot ETFs, futures ETFs only trade on the Chicago Mercantile Exchange (CME). Bitcoin futures ETFs have been around since 2017. The SEC argues that even off-exchange manipulation aimed at affecting CME Bitcoin futures prices would be monitored. However, Grayscale’s representative in the lawsuit claimed that the CME could not prevent fraud and manipulation and therefore meet the legal standard, but the SEC still found the standard met. Judge Rao seemed to agree that the SEC was emphasizing “regulatory detection of fraud only.” Additionally, the SEC rep contradicted herself with these closing statements:

“The key empirical question is whether fraud and manipulation in the spot market have the same impact on CME futures. And we just don’t have conclusive data.” “The second strand is about trading the ETP itself and if it’s predominant – if it’s predominant, then there’s a concern that fraud and manipulation could be in there, and then you wouldn’t see it in the market you’re watching because it’s not the underlying market, it’s trading in the ETP itself.”

Regardless of which ends first in the market, a spot Bitcoin ETF will offer many advantages, including easy accessibility, through a traditional brokerage account, for people who want exposure to Bitcoin without having to buy and store. directly the cryptocurrency themselves. BlackRock ETFs generally offer high liquidity, allowing investors to enter or exit positions quickly and at fair market prices. Investors have a sense of security knowing that the ETF is regulated like familiar stocks.

To conclude, Bitcoin prices will likely continue to rise as ETF prospects look good. If approved, more investors will have access to crypto investments with much lower risks, despite the coin’s inherent volatility and macroeconomic challenges associated with persistently high inflation and the possibility of a recession. Economists from the International Monetary Fund had concluded that the practice of banning crypto assets altogether “may not be effective in the long run,” could make Bitcoin investment available again to these countries. On the contrary, BlackRock’s request is a strong show of support for its partner Coinbase (COIN), which could reverse part of the $517 million outflow from a separate SEC lawsuit alleging that unregistered securities offered traded such than Ethereum (ETH-USD) to users with its staking service. Thus, several major altcoins have fallen out of favor, and Bitcoin’s dominance surpassed 50% for the first time in 2 years on June 19 and is climbing, suggesting it could be the crypto of choice for investors. Finally, the accumulation of Bitcoin in illiquid wallets also reached an all-time high of 15.2 million BTC, bringing the supply available for trading on exchanges down to 4.1 million BTC. Due to the deflationary nature seen with Bitcoin, where there is an inverse correlation between price and amount outstanding on exchanges, an increase in Bitcoin reserves is another bullish sign.

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