The current rise of Bitcoin in October 2023 is due not only to the arrival of ETFs but also to a series of factors that together push the upward trend of Bitcoin (BTC).
Bitcoin (BTC) has seen a monstrous rally over the past week, reaching a high of $35.150. However, the fact that the price has barely retreated even after two ETF news stories were revealed to be fake suggests that perhaps anticipation of the Bitcoin Spot ETF isn’t the only thing driving the surge.
First, a media outlet tweeted that BlackRock’s spot ETF application had received SEC approval. Within minutes, a post on X revealed this as a mistake, and Bitcoin quickly gave back some, but not all, of its gains.
Then, some users noticed that the ticker symbol for BlackRock’s spot bitcoin ETF, IBTC, appeared on the website of the DTCC trade clearinghouse. Market participants interpreted the news as a sign of the fund’s impending SEC approval. However, on Tuesday evening, it was revealed that the IBTC ticket had been on the DTCC site since August and that it literally meant nothing regarding whether or not a spot bitcoin ETF could come.
Despite the disappointment, the price of bitcoin remains very close to Monday's high. At $34.800 today, it is up almost 30% in the past 10 days and more than 100% by 2023.
What is driving the increase?
With all of this in mind, it's important to know that there are a number of additional explanations for Bitcoin's rally. One possibility is that investors are buying Bitcoin as a hedge against inflation. Inflation in the United States is at its highest point in decades, and investors are looking for assets that can protect their wealth from losing value.
Another possibility is that investors are buying Bitcoin as a safe haven asset. The war in Ukraine, the crisis in the Middle East with the Israel-Hamas war and the energy crisis in Europe have created a huge global risk environment, and investors are looking for assets that can maintain their value in turbulent times.
It's also possible that Bitcoin's rally is simply a case of market manipulation. Institutional investors may be buying Bitcoin to drive up the price and then selling it for a profit, especially given the possibility that spot ETFs may eventually be approved.
The expectation for the Bitcoin Spot ETF
This is where the Bitcoin Spot ETF comes in. The Bitcoin Spot ETF is an exchange-traded fund that is backed by physical Bitcoin. Approval of a Bitcoin Spot ETF by the U.S. Securities and Exchange Commission (SEC) would be a landmark event that would open the door to increased institutional investment in Bitcoin.
In March 2023, the SEC rejected Grayscale Investments’ application for approval of a Bitcoin Spot ETF. However, the SEC has indicated that it is willing to approve a Bitcoin Spot ETF if it meets all of its regulatory requirements.
Since then, the anticipation for the Bitcoin Spot ETF has been a key factor in the Bitcoin price rally in 2023. Institutional investors believe that a Bitcoin Spot ETF would make investing in Bitcoin easier and could boost the price of the cryptocurrency.
The delicate global security situation
Added to this factor is the global security and geopolitical situation. The war in Ukraine and Israel are having a significant impact on the price of Bitcoin. Both wars are creating a global risk environment, and investors are looking for assets that can maintain their value in such turbulent times.
In fact, the event that has perhaps had the greatest impact has been the Israel-Hamas war. The attack sparked a new wave of geopolitical uncertainty in the region, leading investors to seek safe haven assets. In fact, the price of Bitcoin began to rise following the possibility that the confrontation would complicate oil and gas trade routes in much of the world.
Banking and economic crisis in the United States and China
Another relevant factor is the situation in the United States and China, the two largest economies in the world. Both are experiencing banking and economic crises that could have a significant impact on the global economy.
In the United States, the banking sector has been affected by two major factors, including:
- Rising inflation is reducing banks' profit margins, causing the cost of living to rise and creating huge economic imbalances in the United States.
- The war in Ukraine is causing increased volatility in financial markets. Added to this is the conflict in Israel and the US support for Taiwan, anticipating a possible military invasion of the island by China, which would be one of the hardest global blows.
These factors have led to increased concerns about the health of the US banking sector. In particular, investors are worried about rising loan defaults, which could lead to a banking crisis.
In China, meanwhile, the economy has been affected by a number of factors, including:
- The bursting of the real estate bubble has caused a liquidity crisis in the real estate sector, with the cases of Evergrande and Cangzhou Bank being the most serious known to date.
- The war in Ukraine, which has caused a slowdown in economic growth.
- The trade and technology war with the United States has forced the country to slow down certain industrial sectors that need access to American technology.
- The tightening of capital control measures and economic controls within China, including in its special economic zones.
These factors have led to increased concerns about the health of the Chinese economy. In particular, investors are worried about rising unemployment and debt, which could lead to an economic crisis.
Continue reading: BlackRock Bitcoin Spot ETF Returns to DTCC Listing
