Bitcoin
and other cryptocurrencies advanced on Friday, continuing the momentum from a rally that began a week ago—but traders may be positioning for a pullback as optimism behind a recent catalyst remains somewhat shaky.
The price of Bitcoin rose 4% over the last 24 hours to near $29,500, trading at the highest consistent levels since early August. The largest digital asset has marched higher since last Friday amid hopes that long-awaited spot Bitcoin exchange-traded funds (ETFs) will soon be approved, a key catalyst that has loomed for months. Nevertheless, there are signs that traders are positioning for a downside move.
“I think a lot of investors are expecting a pullback for Bitcoin and other digital assets because of the issue of rising yields and mounting geopolitical uncertainty,” said Conor Ryder, head of research and data at blockchain group Ethena Labs. “They’re also underallocated to this market even though an approval for a spot Bitcoin ETF seems to be a matter of when, not if.”
Crypto bulls hope that the Securities and Exchange Commission (SEC) will soon allow the
Grayscale Bitcoin Trust
to convert to an ETF or approve spot Bitcoin ETFs from BlackRock and other traditional financial firms. The prospect of a spot Bitcoin ETF—which would hold Bitcoin itself, not just futures tracking the token, as some ETFs hold now—has loomed for months as a catalyst that could usher in a fresh wave of retail and institutional investor interest in cryptos.
While ETF hopes helped Bitcoin beat stocks this week—with the
Dow Jones Industrial Average
and
S&P 500
coming under pressure amid Middle East conflict and a shifting outlook for interest rates—worries that have hit equities could still take hold. Indeed, ETF optimism has driven Bitcoin sharply higher, but it could still be months before a spot Bitcoin ETF actually begins trading—with a lot of opportunity for crypto gloom between now and then. Volatility can also be expected, with Bitcoin even spiking above $30,000 briefly on Monday following a false report that an ETF had been approved.
“There are still risks ahead when it comes to an approval of the spot BTC ETF,” said Ryder. “The SEC could easily continue delaying approval because of that false report that briefly sent Bittcoin soaring, arguing that crypto markets are easily manipulated.”
Beyond Bitcoin,
Ether
—the second-largest crypto—rose 2.5% to $1,590. Smaller tokens or altcoins also gained, with
Cardano
and
Polygon
each up 3%. Memecoins were also buoyant, with
Dogecoin
jumping 3% and
Shiba Inu
advancing 3%.
Write to Jack Denton at jack.denton@barrons.com
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