The crypto market is up today as Bitcoin (BTC), Ether (ETH), Cardano (ADA) and numerous altcoins rallied after multiple large institutions followed BlackRock and filed for Bitcoin ETFs in the United States.
The rally fueled a wave of short liquidations across the market, totaling over $173 million in 24-hours on June 21. The rise in crypto prices is helping to narrow the appreciation gap between equities and the cryptocurrency market which widened after the Federal Reserve paused interest rate hikes.
Despite the strength of today’s rally, its longevity remains under question as investors anticipate further regulation from the United States Security and Exchange Commission. The lack of bipartisan support on crypto regulation makes it unlikely that any significant legislation will pass the U.S. Congress, meaning many cryptocurrencies may be classified as securities by the SEC.
Let’s examine three of the major factors influencing the day’s crypto market strength.
The Bitcoin ETF buzz
Speculations around the potential for the first Bitcoin ETF approval in the U.S. helped the crypto market price to bounce. The speculation skyrocketed after the world’s largest asset manager, BlackRock filed a Bitcoin spot ETF with the SEC on June 16.
Notably, BlackRock, an investment firm managing $9.5 trillion in assets, has applied for 576 ETFs, facing only one rejection. Market analyst Lark Davis predicts an SEC approval could have the asset manager purchase every single Bitcoin available across crypto exchanges. Davis made the statement in the filing noting:
“Only about 10% of all Bitcoin [worth $50 billion] is sitting on exchanges. 0.5% of BlackRock money movings to BTC would buy every single coin available.”
Nonetheless, the SEC has rejected all Bitcoin ETF applications, including those from asset managers like VanEck, Ark Invest, and Bitwise. WisdomTree is the most recent investment firm to lodge a new filing for a spot Bitcoin ETF that has been rejected by the SEC twice. The first rejection took place in December 2021 and again in October 2022. WisdomTree, a New York based asset management fund, oversees approximately $83 billion in assets. Another notable asset management fund, Invesco, reactivated an application for a Bitcoin ETF on the Cboe exchange.
Bullish crypto market sentiment is rising
While Bitcoin and altcoins still have risk events that can impact the price, BTC futures are showing traders switching from majority short to long. According to Coinglass, 54.24% of traders are long Bitcoin at a ratio of 1.2 compared to BTC shorts.
Combined with reduced spot volume and Bitcoin’s net exodus from exchanges, prices may see further volatility. Typically, when there is a greater net outflow of Bitcoin from exchanges, sell pressure decreases allowing short liquidations to influence the BTC price at a greater magnitude.
Fed interest rate pause increases risk appetite
At the June 14 Federal Open Market Committee (FOMC) Fed Chairman Jerome Powell revealed that the central bank would pause rate hikes for June. While this move aligned with investors’ expectations, the crypto market did not initially match the equities’ market bullish momentum.
Related: Why is Bitcoin price up today?
While Bitcoin and Ether price has been impacted by the recent negative enforcement news, today’s rally shows a flash of bullish momentum. The Bitcoin Fear & Greed Index has reached a 3-month high highlighting that investors are more apt to take on risk assets.
Overall, crypto markets are likely to continue seeing price volatility powered by macro events. While the positive news of BlackRock’s ETF filing and renewed institutional interest is providing a nice short-term bump in crypto prices, the market’s reaction to any potential enforcement actions or economic recession will be the true determinant of which direction the market chooses to take.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.