SEC Lets Grayscale Off the Hook & Market Shows It's Starving for a Real Bitcoin ETF
SEC Lets Grayscale Off the Hook & Market Shows It's Starving for a Real Bitcoin ETF
Digital Asset Market: A false rumor about a US Bitcoin ETF approval caused a sudden surge in the price of Bitcoin and resulted in high volatility followed by quick liquidations. The rumor was spread by Cointelegraph's X account, but was later confirmed to be false by both BlackRock and sources close to the SEC. The SEC has delayed its decision on BlackRock's ETF application and analysts predict a 75% chance of approval by the end of 2023. The market reacted quickly to the rumor, with $105 million in positions being liquidated, and 40,000 traders being affected in the past day.
The SEC has decided not to appeal a court decision that deemed the regulator’s rejection of Grayscale’s application to turn its bitcoin trust into an ETF as “arbitrary and capricious”. This decision increases the chances of the Grayscale Bitcoin Trust (GBTC) being turned into an ETF. The Bitcoin (BTC) price rose after the news came out. Grayscale first applied for the conversion in October 2021 and claims it will eliminate the discount between the fund's price and underlying bitcoin. This decision could also have implications for other entities waiting for approval for a bitcoin spot ETF from the SEC.
Macro Economics: Egypt announced plans to increase transit fees for all types of vessels passing through the Suez Canal. The increase, effective in 2024, will be 15% for certain types of liquid bulk tankers and 5% for other vessels. Container ships traveling from North-West Europe to the Far East will be exempt from the fee hike. The move is likely to contribute to global inflation as carriers pass on the increased cost to consumers. However, the Suez Canal remains the most cost-effective route for shipping despite the fee increase. In 2021, over 20,600 vessels transited through the canal.
Equities: Retail sales in September rose 0.7%, beating expectations and indicating a strong consumer despite predictions of a slowdown. Nonstore and motor vehicle sales saw the biggest increases, while electronics and clothing sales were the biggest laggards. While consumer spending has been a key factor in keeping the US out of recession, banks warn of potential risks in the future as cash reserves are being spent down.
The Fed and the Banks: The higher than expected retail sale report has boosted Treasury yields and stock market futures, but expectations of a Fed interest rate hike still linger as consumer spending remains steady. The Fed chair will speak this week in New York, where his insights on the economy and future monetary policy will be closely watched.
Geopolitical: The US government has tightened restrictions on chip and chip-making technology exports to China, aiming to close loopholes that allowed Chinese companies to access advanced AI technology. These restrictions were first introduced a year ago, but have now been strengthened by the Biden administration. The new rules prevent the sale of powerful AI training chips, as well as imposing stricter controls on sales of equipment and design software. The US claims these measures are necessary to prevent China from using AI for military purposes, while China has accused the US of hindering its technological and economic progress. These restrictions have had an impact on a major chipmaker, Nvidia, but they have found a way to work around them for now. Chinese technology companies have reportedly placed large orders for these chips, but it is uncertain if these sales will go through before the new rules take effect.
View from our desk
Yesterday's cryptocurrency market showed signs of emerging from its prolonged winter, fueled by last week's SEC decision to drop the Grayscale case and rumors of an impending ETF approval. These developments pushed Bitcoin (BTC) prices to hover around the $30,000 mark, with substantial trading volumes. While the ETF rumor ultimately proved to be unfounded, we believe that the likelihood of such an approval is much higher than the 75% probability cited by some media outlets. Given this outlook, Bitcoin presents a compelling "BUY" opportunity at its current price, offering more probability-adjusted upside than downside.
In contrast, the traditional financial markets have been relatively quiet. One notable exception was the recent retail sales report, which initially appeared surprising. However, a closer look at the details reveals that the uptick in sales was primarily driven by a few sectors, most notably the automotive industry. This isolated boost suggests that the broader economic landscape remains stable, without any significant shifts that might otherwise impact investment strategies.
Looking ahead, all eyes will be on Federal Reserve Chair Jerome Powell, who is scheduled to speak before the Economic Club of New York on October 19th. While we don't anticipate any groundbreaking announcements, his remarks will be closely monitored for any subtle hints or shifts in policy that could influence both traditional and crypto markets. Given the current stability in traditional markets and the potential for positive regulatory changes in the crypto space, investors would do well to stay alert to opportunities in both arenas.
Happy Trading!
The 1Konto Team
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