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City A.M

City A.M

CityAM.com is the online presence of City A.M., London's first free daily business newspaper. Both platforms cover financial and business news as well as sport and…

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Will ETF Progress Help Boost Bitcoin's Appeal As A Safe Haven Asset?

  • ETF developments and a safer-haven narrative are contributing to Bitcoin's rally.
  • The low liquidity environment may lead to sharp corrections but also invites new buying support.
  • Bitcoin's price remains below its pandemic-era all-time highs.

Bitcoin’s price continued to rise on Tuesday, heading higher on optimism about progress in the listing of a spot bitcoin exchange traded fund (ETF) in the US.

The digital asset was up as much as 13 percent on Tuesday afternoon, trading at around $34,450 — its highest point since May last year.

The typically volatile asset briefly pushed above $35,000 (£28,600) this morning, buoyed by news that a federal appeals court had set in stone a victory for Grayscale Investments in its ETF bid — following a raft of objections by the Securities and Exchange Commission.

The regulator has previously pushed back against attempts to list ETFs, which directly invest in bitcoin due to concerns over fraud and manipulation in the underlying market.

Signs of the ETF’s impending approval came alongside the appearance of Blackrock’s iShares Bitcoin Trust on the DTCC — the Depository Trust and Clearing Corp that carries out clearing and settlement in US markets — with the ticker $IBTC. This doesn’t spell definite approval, but is a signal the ground is being prepared for a swift listing if it is approved.

“This price movement solidifies BTC’s momentum compared to the broader digital asset market,” said Matteo Greco, research analyst at Fineqia International.

But analysts say that it’s not just the ETF action driving the price run. The shift in the macroeconomic narrative, with the sharp drop in US Treasury yields this week, alongside a stronger intensification of a “safe haven” narrative for the asset are also propping it up, according to Noelle Acheson, analyst and author of the Crypto is Macro Now newsletter.

“Any one of these should be enough to keep some support under the BTC price, even if it sees a correction after yesterday’s strong run-up,” Acheson told City A.M. “It’s notable that BTC was climbing even during the eye-watering rise in US yields over the past 10 days (higher yields in theory should hurt BTC), that signals strong buying support even before the DTCC news came out.”

Meanwhile, liquidity is still relatively low meaning that any inflows could amplify price moves.

“The low liquidity does mean that corrections could also be sharp, but we are likely to see new buying support come in should the price drop notably from here,” Acheson added.

“In sum, this looks more sustainable than other run-ups this year, given the confluence of supportive threads. That doesn’t mean there won’t be a correction – but if there is, it is likely to be met with new support.”

Prices still remain well below all-time highs seen during the pandemic when bitcoin summited at almost $69,000.


By City AM

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