The Bitcoin price shot higher this morning on bullish news revolving around the potential approval of the first spot Bitcoin ETF in the United States.
First, we heard that crypto asset manager Grayscale won a key lawsuit against the SEC and the evil villain at the head, SEC chair Gary Gensler. A DC Court of Appeals has granted Grayscale’s petition for review to convert its GBTC Trust into a Bitcoin Spot ETF and has ordered the SEC’s order to be vacated.
Gary has been attacking the crypto industry relentlessly since he was nominated to the post by President Biden. He has stubbornly rejected multiple spot Bitcoin ETF applications while approving futures ETFs and even leveraged crypto ETFs. In what world does it make sense to “protect investors” by rejecting spot Bitcoin ETFs that actually buy and hold Bitcoin in institutional cold storage, but approve crypto ETFs that do not actually hold the underlying asset or approve ETFs that expose investors to the potential for leveraged losses in a sector that is already volatile?
Tide May Have Turned in Favor of a Spot Bitcoin ETF
But the tide may have turned today, as Grayscale’s victory over the SEC is significant. First off, it is very rare for a federal circuit court to find that an agency has violated the APA by acting arbitrarily and capriciously. The DC Circuit delivered a huge embarrassment for Gensler and the SEC by soundly rejecting the SEC’s view that Grayscale’s ETF proposal was not “designed to prevent fraudulent and manipulative acts and practices.”
The SEC has spent a full decade denying spot bitcoin ETF proposals under this reasoning but now has to go back and review Grayscale’s proposal again, with the court’s ruling in mind. This does not guarantee that a Bitcoin ETF will not be approved, but it significantly increases the odds in our view. And those odds had already shot up when the world’s largest asset manager, Blackrock, filed an application for a spot Bitcoin ETF. This move was a game changer with massive institutional moves to enter the crypto space now underway.
We are now likely to see increased political pressure on the SEC to approve spot bitcoin ETFs and many politicians are now calling for Gensler to be fired. In fact, #FireGaryGensler was trending today on social media.
While this news today is specific to the Grayscale lawsuit, it will have a significant impact on the entire crypto industry, including the TradFi vultures waiting to get a piece of the action. Larry Fink has the ears of politicians, so it is widely believed that it will only be a matter of time until a Bitcoin Spot ETF is approved.
JUST IN – Bloomberg ETF Analyst James Seyffart says Grayscale winning its lawsuit against the SEC “definitely increases the odds of approval” for a spot #Bitcoin ETF 🚀
— Bitcoin Magazine (@BitcoinMagazine) August 29, 2023
And lest we forget, this positive legal outcome follows Ripple’s partial win in court recently. On July 13, 2023, U.S. District Judge Analisa Torres ruled that Ripple Labs Inc did not violate federal securities law by selling its XRP token on public exchanges, a landmark legal victory for the cryptocurrency industry. I say partial win because the federal judge also ruled that XRP is a security when sold to institutional investors, as it met the conditions set in the Howey Test.
Shares of Coinbase (COIN) shot 15% higher today on the Grayscale news, as many think it increases their odds of also winning in court against the SEC. Most of the Bitcoin mining stocks that we hold or track were also up double-digits today. We favor the miners that hold most of the Bitcoin they mine on the balance sheet as opposed to those that sell most of it for fiat dollars. The miners that HODL should see considerably more upside over the next few years.
The $646 billion asset manager Alliance Bernstein said that the $GBTC ruling “likely clears the path for a spot Bitcoin ETF.” Bloomberg analysts now say that Spot Bitcoin ETFs have a 75% chance of being approved.
Bitcoin Price Spikes Higher on Grayscale News
Bitcoin is up 6.6% following the Grayscale win to over $28,000. It still has some work to do on the technical chart to climb back into the bullish trend channel. We also see that Bitcoin is battling key resistance around the convergence of the 50 and 100-day exponential moving averages. But the RSI is pointed higher with plenty of room to run before becoming overbought, so I suspect the price is likely to climb back into the trend channel soon.
We are now just 230 days away from the next Bitcoin halving/halvening, expected in mid-April of 2024. The price tends to move higher into the halving and during the 6 to 12 months following it.
We are very likely in the accumulation phase currently and have another 6 months or so before we see the next major bull run. Of course, this time line could be accelerated by an event such as the approval of a spot Bitcoin ETF. In which case, we have even less time to accumulate under $30,000.
How soon could we see the approval of a spot Bitcoin ETF?
An SEC ruling on BlackRock’s spot Bitcoin ETF and five other applications is due this week, by the end of day on Friday.
Bullish Factors for Bitcoin
Another bullish factor that few people are talking about is the rapidly rising Bitcoin hash rate. It recently smashed through 400TH/s to make another record high. What is interesting is that this is the first bear market where the hash rate is hitting new ATHs. Most analysts were expecting we would see a repeat of 2018 & 2021, when the hash rate dropped during the corrective phase.
In December 2018, the Bitcoin price crashed 50%, from $6K to $3K. This caused a ”Bitcoin mining death spiral,” as the hash rate also dropped over 30%. Then in 2021, China banned Bitcoin mining, contributing to a 60% crash in the Bitcoin price. This caused a ”Bitcoin mining death spiral,” as the hash rate also dropped over 30%. But now we have a hash rate race whereby nation states are publicly and privately mining Bitcoin in this bear market. Price typically follows hash rate, so we expect a huge move is possible over the next 12 months as the price catches up to the hash rate increase.
One last anomaly worth noting is that in every prior Bitcoin bear market there has been an increase in the number of coins on exchanges. This makes sense as investors look to lock in profits, protect capital and then many panic sell near the bottom. During 2015 we had an increase of 800,0o0 coins and during 2018 an even larger increase of 900,000 coins on exchanges. Yet during 2022, while the price was dropping over 75%, the amount of coins on exchanges actually decreased significantly.
To further illustrate this point, here we have a charge of the percentage of Bitcoin held by long-term holders. It just crossed 75%, hitting a new record high.
The simple translation is that there is less Bitcoin in weak hands, fewer coins being panic sold and a much lower supply available for new institutional entrants that most people fully appreciate. When you mix in the recent industry wins versus the SEC, the hash rate advancing to record highs, the 2024 halving rapidly approaching, accelerating de-dollarization globally as BRICS expands, and the Federal Reserve likely to end rate hikes soon, we see a recipe for a massive advance in the price of Bitcoin over the next year.
Our Bitcoin price forecast by the end of 2023 is $50,000 and we think the Bitcoin price could trade above $150,000 and as high as $200,000 during 2024. If trillions in institutional money flood into this relatively small sector, those price predictions could end up being conservative. Are you stacking Sats?
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