Bitcoin’s price experienced a significant increase of 5% today, reaching a two-week high of over $28,000. This surge in price can be attributed to the recent ruling by United States Court of Appeals Circuit Judge Neomi Rao in favor of Grayscale Bitcoin Trust (GBTC) against the U.S. Securities and Exchange Commission (SEC). Judge Rao’s decision has not only fueled the current institutional interest in Bitcoin but has also generated optimism within the market.
Grayscale Bitcoin Trust (GBTC) submitted a petition for review after the SEC denied their application for a spot Bitcoin exchange-traded fund (ETF) due to concerns of “fraud.” The company argued for the legitimacy of Bitcoin futures, which ultimately led to the appeals court’s decision to vacate the SEC’s order. Although this ruling does not approve the spot ETF, Judge Rao emphasized the need to grant Grayscale’s petition and overturn the Commission’s order.
The vacating of the SEC’s denial of Grayscale’s ETF has had a positive impact, not only on Bitcoin’s price but also on the discount of the Grayscale ETF itself. The discount is currently approaching its highest level since 2023, sitting below 25%. This renewed confidence in the Grayscale ETF reinforces the growing institutional interest in Bitcoin.
BlackRock and Fidelity Investments, two prominent financial institutions, are scheduled to receive responses regarding their BTC spot ETFs on September 2. BlackRock, known as the world’s largest asset manager with over $8.5 trillion in assets under management, plans to utilize Coinbase for BTC custody. With the upcoming ETF decisions, the SEC will hold the power to approve, deny, or delay these proposals.
Concurrently with the rise in Bitcoin’s price on August 29, there has been a noticeable decrease in the BTC supply on exchanges. In fact, the supply on exchanges is currently at its lowest level since January 2018. The market interprets this movement of coins out of exchanges as a bullish signal, indicating that traders are opting for long-term self-custody of their BTC holdings.
On-chain data reveals a consistent trend of exchanges shedding Bitcoin since May 18, 2023. Despite the prolonged bear market, large portions of Bitcoin investors are positioning themselves for a potential BTC price rally. Consequently, the reduction in Bitcoin on exchanges has resulted in decreased liquidations, leading to higher volatility in the market. Over the past 24 hours, more than $46.5 million in BTC shorts have been liquidated, contributing to the ongoing short-seller losing streak.
Although there has been a notable increase in Bitcoin’s price and the liquidation of short positions, approximately 48% of the futures market remains short on the Bitcoin price. This high ratio of short positions potentially sets the stage for a short squeeze, where a sudden increase in price forces short-sellers to close their positions, further driving up the value of Bitcoin.
Despite the recent positive developments, the Bitcoin Fear & Greed Index indicates that the market is still predominantly fearful, with a decrease of over 13 points compared to the previous month. This sentiment reflects the cautious outlook of investors, showcasing the need for sustained upward price movement and further regulatory clarity to instill confidence in the market.
The recent ruling in favor of Grayscale Bitcoin Trust against the SEC has generated a promising uptick in Bitcoin’s price. The decision has not only reinforced institutional interest in Bitcoin but has also provided renewed confidence in the Grayscale ETF. Moreover, the continuous reduction of Bitcoin on exchanges and the high ratio of short positions present intriguing dynamics within the market. As the market navigates the ongoing bearish sentiment, it remains crucial to closely monitor upcoming ETF decisions and regulatory developments to gain a clearer understanding of Bitcoin’s future trajectory.