Why Bitcoin, Ethereum, and Dogecoin Rallied Today

The prices of several major cryptocurrencies jumped on Tuesday amid increased speculation over the imminent approval of the first spot Bitcoin (BTC 1.14%) exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC). As of the regular markets’ close on Tuesday, Bitcoin was up more than 9%, Ethereum (ETH 0.35%) had gained nearly 7%, and Dogecoin (DOGE -1.78%) had risen 5.5%.

Fresh signs of the first spot Bitcoin ETF approvals

Late Monday, Bloomberg ETF analyst Eric Balchunas pointed out on social media platform X that BlackRock‘s (BLK -0.38%) iShares Bitcoin Trust had been listed on the Depository Trust & Clearing Corporation (DTCC) website (the organization that clears all Nasdaq trades) with the planned ticker symbol IBTC. The news subsequently garnered so much attention that the DTCC website briefly crashed due to overwhelming traffic.

Indeed, Tuesday’s optimism followed a significant rally in cryptocurrency prices last week, which was spurred by the SEC’s reported decision not to appeal a federal court’s August reversal of its order preventing crypto asset manager Grayscale from converting its widely popular Grayscale Bitcoin Trust (GBTC 5.89%) into an ETF.

Sure enough, late Monday the D.C. Circuit of Appeals formalized Grayscale’s court win over the SEC, indicating no appeal was filed and putting the onus back on the SEC to move forward with its approval process. The court described the SEC’s order preventing Grayscale from converting its bitcoin trust into an ETF — while simultaneously allowing bitcoin futures funds to launch — “arbitrary and capricious.”

“This is pretty much checking every box that you need to check before you launch an ETF,” Balchunas added, noting the timing of the ticker’s appearance on the site was “surprising” considering any formal approval of a spot bitcoin ETF by the SEC was widely expected to happen sometime over the next several weeks.

Why the first Bitcoin ETFs are likely still several weeks away

You shouldn’t hold your breath waiting for an imminent approval of the first spot Bitcoin ETFs. Eagle-eyed investors noticed early Tuesday that BlackRock’s iShares Bitcoin Trust was no longer present on the DTCC’s list this morning — a change Balchunas speculated may have happened after BlackRock was “told to or want[ed] to wait until they are days, not weeks or months away” from the SEC’s formal approval.

It’s hard to blame BlackRock, of course, for ensuring all the pieces are in place to move forward as soon as that approval hits the wires. For perspective, the SEC’s final deadline to respond to BlackRock’s application is March 15, 2024. According to a research report released last week by JPMorgan, however, the first approvals of spot Bitcoin ETFs will most likely arrive before January 10, 2024 — the final deadline by which the SEC is required to respond to ARK Invest’s open application for its “21Shares” bitcoin ETF. At that time — rather than responding to individual applications separately over the course of several months — the SEC will most likely approve multiple applications at once to level the playing field and prevent any single bitcoin ETF from gaining a so-called “first-mover” advantage.

So why is this a big deal for cryptocurrencies in general? Exchange-traded funds are a much more investor-friendly medium compared to creating separate investment accounts through cryptocurrency trading firms, enabling people to buy and sell shares throughout each trading day through any brokerage firm. Any approval of a spot Bitcoin ETF would significantly broaden investors’ access to cryptocurrencies as a widely accepted asset class and source of portfolio diversification.

As a result, tens of billions of dollars of incremental liquidity would almost certainly flow into cryptocurrencies in short order, likely driving prices even higher in the near term. According to a report from data analytics firm CryptoQuant last week, the overall cryptocurrency market capitalization could ultimately increase by a total of more than $1 trillion after Bitcoin ETFs are approved and become mainstream.

In any case, it now seems a matter of if, not when we see the SEC finally give its stamp of approval to the first Bitcoin ETFs. Cryptocurrency investors are rightly enthused by the news.