Bitcoin surges as ETF rumours swirls, but gloom still lurks at the edges of the crypto market

Bitcoin hit its highest level in 17 months on Tuesday, 24^th October – briefly breaking the 35,000 USD mark before pulling back.

For months now, crypto traders and investors have been waiting impatiently for the SEC to make a judgement on several crypto ETFs that have been submitted for approval by various large investment banks. Notable among them is Blackrock's iShares Bitcoin Trust ETF, which has garnered the most attention.

The recent spike in Bitcoin was driven by the appearance of Blackrock’s Bitcoin ETF on the eligibility file at the DTCC (Depositary Trust & Clearing Corporation, which clears Nasdaq trades). Traders took this as an early sign of regulatory approval, and Bitcoin promptly jumped 10%.

Responding to the sudden surge in Bitcoin price, the DTCC said the list was its eligibility file, which includes active and potential ETFs and that Blackrock's iShares Bitcoin Trust ETF was added in August as "standard practice...in preparation for the launch of a new ETF".

More experienced market voices made it clear that listing an unapproved ETF on the DTCC’s eligibility file meant absolutely nothing regarding regulatory approval and was just an administrative step.

Probably due to the market madness, the DTCC has since removed the Blackrock ETF from the eligibility file. While this did cause a pullback in Bitcoin price, the ETF rumour mill is still going strong and crypto traders are discussing an end to the “crypto winter”.

Blackrock has done nothing to quell the speculation. "We're hearing from clients around the world about the need for crypto," BlackRock CEO Larry Fink recently told Fox Business. In the same interview, Fink said that he saw Bitcoin as another haven asset for investors, like bonds or gold. "I believe crypto will play that type of role as a flight-to-quality."

In the meantime, the FTX trial continues, with former CEO Bankman-Fried now expected to take the stand in his own defence. The SEC´s cases against Binance and XRP also rumble on, both with the potential to cancel the supposed crypto springtime.

Finally, let’s not forget that the recent Bitcoin hype does not consider the possibility of the SEC rejecting Bitcoin ETFs outright. While this is unlikely, even a partial rejection would send the crypto market back into the freezing depths of winter. As we mentioned in our article in August, the crypto market is at a crossroads, and the next few months will decide its direction for years to come.

As always, take great care when trading cryptocurrencies – the volatility and unpredictability of these assets make them especially susceptible to leverage risk.

Technical Analysis

Having doubled its value year to date, with a rise from the December 2022 close of $16,542, the Bitcoin surge caught many unaware. Even after the ETF-approval rumour was debunked, Bitcoin surged higher, but after three enormous green days, it has begun to retrace, and will possibly consolidate between the $32,000  and $36,000 levels. This retracement is likely due to profit-taking, which, if it continues, could see support at $28,030 (61.8% Fibonacci level) and below this, at $25,000.

The general consensus is that Bitcoin is poised for more upside moves, and catalysts for the bull run include the halving event that will occur in April 2024. The halving occurs every four years and is an event where the mining reward per block is halved (which is not good for Bitcoin miners), meaning there is a lower influx of Bitcoin into the market. As a result, its price surges because of the supply-demand gap that has been created. Added to this is that it appears central banks are done with interest rate hikes (the ECB paused hikes at today’s meeting), so investors are looking with renewed interest at the cryptoasset to diversify their portfolios.

USD/BTC Chart on XTB, prepared by Alison Heyerdahl

As long as the bulls hold the price above the $32,000 area, there is room for continued strength toward the $40,000 psychological handle.