One highly volatile asset class has been on an uptrend over the course of recent trading days. Despite regulatory worries that have loomed heavy over the heads of Cryptocurrency traders and investors alike in recent weeks, Bitcoin (BTCUSD) rose to its highest level in months yesterday, taking some other key digital coins along with it for the ride.
Earlier this June, two lawsuits filed by the United States’ Securities and Exchange Commission (SEC) against two of the largest Crypto exchanges, Coinbase (COIN) and Binance, raised fears that a heavier crackdown could weigh on market sentiment over the near term.
With digital coins being a relatively new asset class, differing opinions regarding how they should be classified for the purposes of market regulation have led to some uncertainty among legislators and market actors alike.SEC Chair Gary Gensler has previously expressed that most digital tokens should be subject to the rules of the nearly 90-year-old regulatory body. It is this issue that led the SEC to file suit against Binance and Coinbase due to the contention that the exchanges were not compliant with U.S. law.
Despite showing drops on June 12th, following the lawsuits’ filing, it may seem at the moment that the Crypto market has not only weathered the potential storm but also reached new heights. Why might this be?
Bitcoin’s Flying Leap
As of the time of writing, Bitcoin has surged more than 6% to reach above $30,100 per coin. This upsurge, according to savvy market analysts, represents Bitcoin breaking a nearly two-month downtrend to reach its highest price since April.
The Crypto sphere may have been hit by some negative news lately, such as the collapse of FTX in addition to the Securities and Exchange Commission’s latest regulatory moves, but a surge of interest from some well-known asset management firms might have been enough to reverse the tide.
Last Thursday, June 15th, Blackrock made the initial moves to develop a spot Bitcoin exchange-traded fund. This financial tool would provide Blackrock clients with exposure to Bitcoin without the necessity of owning any of the digital currency. One interesting twist to this story is that the custodian for this nascent Blackrock ETF is Coinbase - the very exchange currently under such heavy scrutiny by the United States government.
However, this detail does not seem to have dissuaded Blackrock’s industry peers, among them Valkyrie and WisdomTree, from filing for the creation of their own proprietary Bitcoin exchange-traded funds. (Source:CNBC)
With major financial institutions seemingly prepared to get their feet wet in the Crypto pool, these moves may have provided the needed impetus for the market mood surrounding digital coins to shift toward the positive end of the spectrum.
Ethereum Joins the Uptrend
Despite recent exchange-traded funds being focused on Bitcoin, Ethereum (ETHUSD) has not been a stranger to the turnaround in recent days. As of the time of writing, Ethereum has risen more than 1% to reach above $1,900.
Analysts posit that the proximate cause for this latest rise could be Ethereum riding on Bitcoin’s coattails; as the second-most popular Cryptocurrency, the 30% surge in digital coin transactions may have benefitted Ethereum as well.
While, as mentioned above, Cryptocurrencies are relative newcomers to the modern economy, they are generally considered to track the overall trends of traditional asset classes. That being so, traders may wish to keep an eye on how major Indices flux and flow in response to different stimuli, such as the interest rate decisions made by the Federal Open Market Committee (FOMC) or the United Kingdom’s Bank of England, set to be released on July 26th and later today, June 22nd, respectively.
Furthermore, while key legislators in the United States like senior Democrat Maxine Waters may still be wary regarding Cryptocurrencies’ nature and how they will fit into the country’s regulatory apparatus, Federal Reserve Chairman Jerome Powell recently stated that they have ‘staying power’ as an asset class. How the dueling forces of stringent regulatory oversight and market enthusiasm will interplay over the near- and medium-term for this market sector remains to be seen.