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Bitcoin is the market to watch as SEC mulls 21Shares ETF approval


Yesterday, Bitcoin (BTC) experienced a robust rally, surpassing the $47,000 mark and reflecting a 6.9% surge in price compared to the previous day. This upward momentum follows a positive trend observed in the first week of the year, that resulted in a 3.9% increase from the closing value of the preceding week.

BTC encountered notable volatility throughout last week, witnessing positive price movements on Monday and Tuesday when it touched almost $46,000. That was followed by a significant dip on Wednesday that brought it to its weekly low of about $40,750.

BTC’s price rebounded swiftly on the same day, however, closing at $42,850. The trajectory continued into Thursday with a closing price exceeding $44,000, setting the stage for a relatively stable weekend with low volatility that anticipated yesterday’s rally.

What is driving volatility in the Bitcoin market?

The market’s tumultuous nature is predominantly attributed to the imminent SEC decision on the approval or rejection of BTC Spot ETFs. The SEC will communicate its decision to 21Shares by January 10, and likely notify most, if not all the 12 other issuer applicants on the same day of approval. This approach aims to prevent 21Shares from having a first-mover advantage over other issuers.

Elevated volatility correlates with increased trading volume, as evidenced by the trading volumes on centralised exchanges. Cumulative volume on centralised exchanges reached approximately $1.1 trillion in December 2023, marking the highest level since May 2022. The trend of heightened volume persisted into the first week of 2024, with daily volumes reaching $42.7 billion to Jan. 7, the highest weekly level since March 2023.

“The connection between elevated volumes and the impending decision on BTC Spot ETFs is apparent when examining the daily spot volume on centralised exchanges using a weekly moving average,” said Matteo Greco, a research analyst with Canadian-listed digital asset investor Fineqia.

In the period between January 1 and 7, 2024, BTC recorded $14.1 billion in daily volume, reflecting a 61% increase from the $8.75 billion recorded the previous week. In the same period, Ethereum (ETH)’s total daily volume amounted to $4.2 billion, marking a 3% decrease from the $4.4 billion recorded in the preceding week.

BTC’s recent strength is further validated by analysing its dominance, which represents its market capitalisation relative to the entire digital asset market.

BTC’s share was 54% at the end of the week, a 5.8% increase from 51% registered the previous week. These data points indicate a shift of capital from altcoins to BTC, aligning with positive sentiment by market participants toward an approval of BTC Spot ETFs.

The anticipation of Exchange Traded Fund approvals is also evident in the Grayscale Bitcoin Trust (GBTC) discount, which narrowed to 5.6%, its lowest level since June 2021. This data underscores investors’ perception of SEC approvals to be quite likely, including a go-ahead for Grayscale to convert its BTC trust into a BTC ETF, thereby reducing the discount to zero.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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