Bitcoin and other cryptocurrencies experienced a significant surge on Monday, driven by the increasing likelihood of the Securities and Exchange Commission (SEC) approving the very first Bitcoin exchange-traded fund (ETF), a crucial development for the crypto market.
Over the past 24 hours, Bitcoin’s price has risen by over 3%, surpassing the previously stagnant trading range of around $26,000 that had persisted for the past week. The largest digital asset is now approaching the critical $28,000 level, beyond which lies its recent peak at approximately $28,500.
While cryptocurrencies have been influenced by broader economic factors, such as interest rate expectations and geopolitical conflicts, they are now being shaped by crypto-specific catalysts once again.
The focus is on imminent decisions from the SEC concerning spot Bitcoin ETFs and the conversion of the Grayscale Bitcoin Trust into a spot Bitcoin ETF. This month, the regulator may make a decision on whether to approve the first ETFs of this kind, which were applied for by financial giants like BlackRock and Invesco during the summer. The SEC is also considering whether to appeal a legal victory by Grayscale, which sets the stage for the trust’s conversion into an ETF.
Recent news indicates that the SEC does not plan to challenge a federal court ruling, as reported by Barron’s, clearing the way for Grayscale’s trust to convert into an ETF.
Although futures ETFs that hold Bitcoin have existed for several years, there is currently no spot Bitcoin ETF in the U.S. A spot Bitcoin ETF, which holds actual Bitcoin rather than derivatives tracking the token, is anticipated to generate renewed interest from investors in digital assets and potentially attract greater institutional participation.
A key indicator of growing optimism among traders regarding the Grayscale conversion is the narrowing of the Grayscale discount. As a relatively illiquid trust, Grayscale’s Bitcoin fund has traded at a discount to its net asset value for nearly two years. However, this discount has shrunk as market participants speculate that the SEC will approve the fund’s conversion, bringing it closer to its net asset value.
On Monday, the Grayscale discount reached its narrowest level since December 2021, dropping below 16%, down from nearly 19% at the start of October.
Moving beyond Bitcoin, Ether, the second-largest cryptocurrency, advanced by 2% to reach $1,580. Smaller tokens, or altcoins, also showed strength, with Cardano gaining 2% and Polygon increasing by 1%. Memecoins like Dogecoin and Shiba Inu also saw a 1% increase.