NEW YORK, October 25, 2023 - While many attribute Bitcoin's recent surge to the anticipation of a spot ETF approval, some analysts suggest alternative reasons for the cryptocurrency's rise.
Over the past week, Bitcoin (BTC) has experienced a significant rally driven by two spot ETF-related stories, both of which turned out to be false. Interestingly, Bitcoin's price has remained high even after the fake news was debunked, indicating that the surge may not be solely due to ETF speculation.
To recap, Bitcoin had been trading within a narrow range of roughly $27,000 to $28,000 for weeks. This changed ten days ago when a media outlet mistakenly tweeted that BlackRock's spot ETF application had received U.S. Securities and Exchange Commission (SEC) approval. Bitcoin's price quickly spiked above $30,000 but gave back some, though not all, of its gains once the error was revealed
Earlier this week, market participants noticed that the ticker for BlackRock's spot Bitcoin ETF, IBTC, appeared on the website of the trading clearinghouse DTCC. This was interpreted as a sign of imminent SEC approval, causing another price spike to $35,000 on Monday evening. However, it was soon clarified that the IBTC ticker had been on the DTCC site for months and had no bearing on the approval status of the ETF.
Despite these corrections, Bitcoin's price has remained close to Monday's high, currently standing at $34,400, marking a nearly 30% increase over the past 10 days and more than a 100% increase for 2023.
If Not an ETF, Then What?
Some analysts argue that Bitcoin is being sought after as a safe-haven asset, especially amid prolific government spending, rising debt levels, shaky stock and bond markets, and Bitcoin's increasingly constrained supply.
“We now have the biggest asset managers in the world trumpeting Bitcoin as a 'flight to quality' amidst devaluing fiat currencies and mounting global tensions and war,” said Charles Edwards, founder of Capriole Investments. ”You couldn’t ask for more.
Jeff Dorman, chief investment officer at Arca, noted that after 2022 led many to believe digital assets were correlated to stocks and bonds, the current situation is perplexing. “A debt spiral leads to a loss of confidence in banks and governments and a repricing of risk-free rates amidst record supply, which is bad for bonds and equity valuation models, but good for alternative forms of wealth and money creation,” he explained.
Hedge fund giant Paul Tudor Jones has touted gold and BTC as attractive investment options due to geopolitical risks and the “untenable” U.S. debt levels, which make it difficult to own stocks.
As the classic 60% stocks, 40% bonds portfolio faces one of its worst periods, uncorrelated assets like BTC could serve as potent contenders for diversification, according to separate arguments from K33 Research and CoinShares.
Bitcoin's current rally demonstrates its potential as a hedge against traditional market turmoil and a diversification tool, appealing to investors looking for stability in uncertain times.