Bitcoin holds onto momentum after 'dress rehearsal' for possible spot ETF approval

Quick Take

  • Bitcoin is holding above $28,000, sustaining a rally first sparked on Monday by a false report about the approval of a spot ETF.
  • The world’s largest digital asset by market cap is continuing to outperform major altcoins, such as ether.
  • Major stocks indices are back in the red, meanwhile, as concern over global unrest and fears about tighter monetary policy spook investors.

Bitcoin's price held onto momentum first seen yesterday after a false report about the supposed approval of a spot ETF had crypto markets buzzing. 

The world's largest digital asset by market capitalization climbed 1.5% over the past 24 hours to $28,520 at 12:30 p.m. ET. Conversely, ether has slumped, down around 1% over the same period to $1,578, according to Coingecko.

On Monday, a false report inaccurately asserted that BlackRock's proposed spot bitcoin ETF had gained approval, causing a surge in trading activity and volatility. While bitcoin pared gains after the report was debunked, it still ended the day higher than where it had started. 

Analysts mostly saw the market activity ignited by the false report as a dress rehearsal for what would happen if a spot bitcoin ETF was actually approved.

"Yesterday's case showed us that the market is waiting for good news and ready for growth," YouHodler Chief of Markets Ruslan Lienkha told The Block. "Spot bitcoin ETFs will be approved sooner or later, and market participants understand that."

BlackRock sees 'flight to quality'

This perspective was echoed by BlackRock CEO Larry Fink in an interview with Fox Business on Monday. He suggested the market reaction to the false report revealed "the pent-up interest in crypto."

According to Fink, there was more to Monday's rally than the ETF rumor. He said it suggested a flight to quality spurred by fears of further global unrest.

"I think there's more people running into a flight to quality, whether that is in Treasuries, gold or crypto, depending on how you think of it. And I believe crypto will play that type of role, as a flight to quality," The BlackRock CEO added.

Fink's appraisal of the situation was reinforced by a downturn in U.S. stocks in early trading on Tuesday, as rising bond yields once again weighed in on investor appetite for risk assets. The S&P 500 lost 0.2%, while the Nasdaq Composite slipped 0.4% and the Dow Jones Industrial Average fell 0.1%.


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In contrast, the 10-year U.S. Treasury yield topped 4.8%, suggesting investors are factoring in the prospects of tighter Federal Reserve monetary policy. The risk-off sentiment could be amplified if investors consider the economic impact of global unrest, particularly the war in Ukraine, and the Israel-Hamas conflict.

Bitcoin outperforming ether

According to Tuesday's Deutsche Digital Assets report, performance dispersion among crypto assets continues to be relatively high, with bitcoin outperforming many major altcoins, including ether.

Deutsche Digital Assets analyst André Dragosch said ether has continued to underperform bitcoin for a variety of reasons including the recent release of the BitVM paper by Robin Linus that suggests that "any computable function can be verified on bitcoin."

Dragosch suggested that the saturation in demand for ETH staking was another factor for the altcoin's underperformance versus bitcoin.

"The size of the ETH entry queue has declined considerably, and that suggests the demand for staking is becoming saturated," he said. "This suggests that staking yields may have found their equilibrium at around ~3.45% p.a."

According to Ruslan Lienkha, interest from mainstream media and institutional finance also explains bitcoin's recent tendency to outperform ether.

"Bitcoin is outperforming ether because we are in the process of a broader adoption of crypto among the general public, so it is quite logical that purchasing bitcoin is usually a new investor's first move," the YouHodler analyst said. "There are just a few investors who start from alternative coins."

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Brian McGleenon is a UK-based markets reporter for The Block. He has worked as a financial journalist and producer for multiple news outlets over the years, such as Fuji Television, The Independent, Yahoo Finance, The Evening Standard, and The Daily Express. Brian is also a screenwriter and producer with one feature film produced and one in development with Northern Ireland Screen. Apart from web3 and cryptocurrency developments, he is also interested in geopolitics, environmental issues, artificial intelligence, and longevity research. Get in touch via email [email protected].


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