The crypto sector has been hit by a loss of investor confidence and increased regulatory investigation this year after a series of failures at leading crypto companies
BlackRock’s plans for a bitcoin (BTC-USD) fund have helped push the world’s biggest cryptocurrency by market value to its highest level in a year, but increasing interest rates and a regulatory clampdown could pause the rally, said analysts and industry insiders.
Bitcoin climbed over 15 per cent during the past week, surpassing $30,000 for the first time since April, its best week since March, largely driven by BlackRock filing an application with the U.S. Securities and Exchange Commission (SEC) to launch an exchange-traded fund (ETF) backed by bitcoin.
If approved, a bitcoin exchange-traded fund from the world’s largest asset manager could draw investors unwilling to purchase the high-risk token directly.
The sector has been hit by a loss of investor confidence and increased regulatory investigation this year after a series of failures at leading crypto companies last year left investors with losses.
In a market led by sentiment, with sky-high valuation forecasts not uncommon, the crypto sector saw BlackRock’s application as an indication that Wall Street is coming round to bitcoin, an outlook strengthened by the launch of a crypto exchange backed by Citadel Securities, Fidelity Investments and Charles Schwab.
But economic pressures could thwart expectations of a sustained rally, experts say. Bitcoin’s advances slowed towards the end of the week, and on Monday it was changing hands at $30,405.
Persisting inflation and economic recession concerns are still longer-term risks that we have to be wary about, stated Youwei Yang, chief economist at BTCM.
From our view, and based on conversations with sell-side desks, this rally was driven by institutional buyers, stated Wes Hansen, head of trading and operations at Arca.
The Securities and Exchange Commission has yet to approve BlackRock’s application, and it has so far rejected proposed exchange-traded funds that track bitcoin from firms such as Fidelity and Cboe Global Markets. Digital asset manager Grayscale had its proposal for a spot bitcoin exchange-traded fund declined last year.
In earlier spot ETF refusals, the Securities and Exchange Commission has cited concerns about market manipulation, and BlackRock’s application seems to take a different approach to address this sticking point, stated Riyad Carey, a research analyst at Kaiko.
