Positive impact of spot ETFs: Can the price of Bitcoin return to its high point two years ago by hitting $38,000?

In the early morning of November 10, the cryptocurrency market started a carnival again. BTC once approached $38,000, an increase of nearly 8%. Then ETH continued to rise, breaking through $2,100. But the price of Bitcoin then fell back. As of press time, the latest price of Bitcoin is $36,670.8, down 0.08% in 24 hours; the price of Ethereum is relatively stable, with the latest price at $2,110.66, down 0.48% in 24 hours.

The reporter noticed that the rise of cryptocurrencies such as Bitcoin was still driven by the news of Bitcoin and Ethereum spot ETFs.

In this regard, Wu Gaobin, co-founder and executive vice president of the Web3.0 Special Committee of the China Association for Democracy and Investment, told the China Times reporter that the main driver of this round of Bitcoin price increases is the good news of spot ETFs. The launch of spot ETFs will help improve the liquidity and transparency of the cryptocurrency market and attract more institutional investors to enter the market. Therefore, in the short term, the positive impact of spot ETFs will continue to drive the cryptocurrency market to continue to rise. However, in the medium and long term, the market will return to fundamentals, and investors need to pay attention to industry development and policy risks to determine how long the positive impact of spot ETFs can last.

Ethereum spot ETF may be one step ahead

According to Bloomberg analyst Eric Balchunas, relevant data shows that BlackRock iShares Ethereum Trust was successfully registered in Delaware, and BlackRock's iShares Bitcoin Trust was registered in a similar manner 7 days before submitting an ETF application to the U.S. Securities and Exchange Commission (SEC). Eric believes that BlackRock has taken the first step towards applying for an Ethereum spot ETF.

The reporter learned that in addition to BlackRock, companies such as VanEck, Invesco, and 21Shares have also applied for spot Ethereum ETFs.

Previously, Bloomberg analyst James Seyffart wrote that starting from November 9, the SEC will open a short window period and may approve all 12 spot Bitcoin ETFs, including Grayscale's GBTC. This window period will be open for at least eight days until November 17.

On the same day, according to an article published by Coindesk, a person familiar with the matter revealed that the SEC has negotiated with Grayscale on the details of the company's application to convert its trust product GBTC into a spot Bitcoin ETF, which may have a significant impact on the crypto industry. The person familiar with the matter said that since winning the court lawsuit, Grayscale has been in contact with the SEC's Trading Markets Division and the Corporation Finance Division, both of which will play a role in formulating and approving the company's ETF application.

In response to the news, Grayscale Chief Legal Officer Craig Salm said: "Right now we are just focused on constructively re-engaging with the Trading Markets Department, and there are still some things to resolve." Salm also pointed out that other applicants (such as BlackRock and Fidelity) seem to have made progress in the SEC's own registration negotiations.

Affected by the relevant news, the price of cryptocurrencies has started to rise since the evening of November 9. According to Coingecko data, the total market value of cryptocurrencies has risen to 1.45 trillion US dollars, with a 24-hour increase of 3.6%, setting a new high this year. The total transaction volume of the crypto market in the past 24 hours was about 140.1717 billion US dollars, of which BTC accounted for 49.4% of the market share and ETH accounted for 17.5% of the market share.

According to data from the Hong Kong Stock Exchange, as the price of ETH rose above $2,100, the share price of CSOP Ethereum Futures ETF rose rapidly after opening and broke through HK$12, reaching HK$12.67 at press time, with a daily increase of 11.24%. The current asset management scale has reached US$9 million. CSOP Ethereum Futures ETF is a sub-fund of the CSOP ETF series. Unlike traditional exchange-traded funds, its investment goal is to invest mainly in Ethereum futures on the Chicago Mercantile Exchange.

"ETF expectations are the biggest catalyst that keeps growing, which gives the current rally more momentum," said Josh Gilbert, a market analyst at trading and investment company eToro. He believes that in addition to the trigger of ETFs, the Fed's current halt in rate hikes and the upcoming Bitcoin halving next year also drove the rally.

JPMorgan Chase has expressed doubts about the sustainability of the recent surge in the cryptocurrency market. JPMorgan analyst Nikolaos said that the rise in cryptocurrencies "looks excessive." He said that it is still uncertain whether cryptocurrency regulations will be relaxed in the future.

"Given the extent of the cryptocurrency industry's unregulated status, it is unclear whether regulatory tightening of the industry will be significantly abated." "U.S. cryptocurrency industry regulations remain unsettled, and we do not believe U.S. lawmakers will change their stance as a result of the two legal cases mentioned above, especially with the memory of the FTX fraud still fresh," Nikolaos said.

In this regard, Yu Fenghui, a special researcher at the China Financial Think Tank, told the China Times reporter that the current round of cryptocurrency market rise may be stimulated by the good news of spot ETFs, but it is difficult to determine how long it will last. If the U.S. Securities and Exchange Commission approves these spot Bitcoin ETF applications, it may attract more traditional investors to enter the cryptocurrency market, further driving the market up. However, the market rise is also affected by many factors, including market sentiment, global economic conditions and policy changes.

Always be alert to risks

Recently, news about Bitcoin spot ETFs has been stimulating the nerves of the crypto market. Compared with the pending spot ETFs, cryptocurrency futures ETFs are progressing smoothly.

On October 9, 21Shares and ARK Invest announced that they will launch a new suite of digital asset ETFs, totaling five ETF products. These ETFs leverage on-chain signals and the two companies' crypto-native experience, aiming to achieve long-term capital appreciation through strategic investments in Bitcoin and Ethereum futures contracts and the application of blockchain technology. According to the prospectus, these ETFs will be listed on the Chicago Board Options Exchange (Cboe) and will begin trading next week.

In addition, according to official news, VanEck Ethereum Strategy ETF is now listed on the Chicago Board Options Exchange, trading code EFUT, with a total expense ratio of 0.66%. According to reports, VanEck Ethereum Strategy ETF (EFUT) seeks capital appreciation by investing in Ethereum futures contracts. The fund is actively managed and provides Ethereum-related investments through easy-to-use exchange trading tools. The fund does not directly invest in Ethereum or other digital assets.

The FTX-related case has just come to an end, but the market does not seem to be more cautious. In the past period of time, any news about spot ETFs can drive the fluctuation of the currency price. "If Bitcoin wants to return to its historical high of $69,000 in 2021, it is only halfway through the journey. It is still too early to be optimistic now." A senior cryptocurrency investor told the reporter of China Times.

"Although the news of ETFs has made investors enthusiastic about the cryptocurrency market, cryptocurrency investment still carries high risks and investors need to be cautious when participating in it." In Wu Gaobin's view, when participating in cryptocurrency investment, investors should fully understand market dynamics and assess their own risk tolerance in order to achieve steady growth of assets.

In this regard, Yu Fenghui also emphasized that cryptocurrency investment has high risks, including market volatility, manipulation risk, regulatory risk and security risk. Investors need to clearly understand these risks and do adequate investigation and risk management. At the same time, they should set reasonable investment goals and risk tolerance, formulate investment strategies according to their personal circumstances, protect personal information and funds, and use safe and reliable trading platforms and wallets.