(Kitco News) – Bull market energy returned in full force on Tuesday as the U.S. Securities and Exchange Commission’s about-face on the potential approval of a spot Ethereum (ETH) exchange-traded fund (ETF) excited crypto holders and led to a market-wide price surge.
According to a report by Barron’s, staff at the SEC communicated to exchanges on Monday that they are leaning towards approving these products, saying that if the “outstanding issues” with the ETF applications are resolved in time, approvals could be granted as early as this week.
This was further validated by Reuters, which reported that the regulator asked the Nasdaq, the Chicago Board Options Exchange (CBOE), and the New York Stock Exchange (NYSE) to request updates and modifications to existing applications before an upcoming regulatory deadline.
Notably, the final deadline for VanEck’s spot Ether ETF, which has been pending SEC approval for the past 240 days, is on May 23, giving the asset manager two days to make the requested corrections.
Analysts have now flipped from being bearish on an approval to seeing it as likely, with Bloomberg ETF analysts Eric Balchuncas and James Seyffart now saying the odds are at 75%.
“Lately it’s been hard to go a week without an outrageous attack against crypto by Gensler, Warren & co., but now, at long last, the tides are shifting in the U.S.,” said market analyst Bloodgood. “On Thursday, Senate majority leader Chuck Schumer and 10 other Democrats defied the White House by voting to undo SEC guidance on accounting practices for digital assets.”
“This doesn’t sound like much – it’s not like the U.S. is making Bitcoin (BTC) legal tender, so you might be wondering why the fuss – but the impact of this shift goes far beyond that particular piece of legislation,” he added. “By breaking with Biden, Senate Democrats are showing their willingness to rethink the party’s stance on crypto and hopefully shape more sensible regulation for the industry.”
Bloodgood added that the SEC “unexpectedly asked for filings to be updated on an accelerated basis is not something they would do if they had already decided to reject them this week.”
“The likelihood of an approval thus shot up drastically – something that you’ve probably already seen in the charts,’ he said. “Almost no one expected the SEC to approve the ETFs without a very drawn-out legal battle, so that’s definitely the number one headline to look out for this week.”
As for Bitcoin, Bloodgood noted that the top crypto broke above the 2021 all-time high for the fourth time recently, and said “The uptrend continued after we printed a local low at the beginning of May, and we got two clean resistance breaks after lower-than-expected CPI data came in last week.”
“We have now entered a range in which it’s hard to predict what will happen next,” he said. “We have the 2021 ATH level at $69k and the current ATH at $73,600, so a break in either direction will show us the way.”
Bloodgood outlined three possible scenarios moving forward. “(1) Fakeout: We need to see if this breakout will hold because if this turns out to be a fakeout, I am confident that the local low will be revisited; (2) Range: If bulls manage to defend the $69k level and Bitcoin ranges between that level and the current ATH, then alts will have their time; and (3) ATH Breakout: If bulls manage to break above the ATH level, we will see more money flow to Bitcoin, alts will slowly follow, and we could get close to $80k.”
“All three options are possible, and only time and charts will tell us which one will play out,” he said.
In addition to the excitement caused by the SEC’s pivot on spot Ether ETFs, Bloodgood noted another notable development regarding the spot Bitcoin ETFs which is cause for bullishness by crypto investors.
“Every quarter, U.S. institutional investment managers with over $100 million in assets have to submit 13F filings, which are basically documents that disclose the positions in their portfolios,” he said. “The deadline for these filings is 45 days after the end of each quarter, meaning that we got Q1 filings last week.”
“The key takeaway is that Bitcoin ETFs are already popular with institutions, as there were over 500 holders – a number that’s 200 times higher than the average for a new ETF,” Bloodgood noted. “Unsurprisingly given the price action, ETF flows have also picked up since the last newsletter, bringing in a decent $200-300 million per day.”
“All in all, it’s not a bad week for crypto, and it might get even better if we see followthrough on the SEC’s 180 degree pivot regarding Ether,” he concluded.
At the time of writing, Bitcoin trades at $69,750, an increase of 0.56% on the 24-hour chart, while Ether is up 8.9% and trades at $3,740.
Stocks also trended higher on Tuesday, with the Nasdaq and S&P 500 both setting new all-time highs. At the closing bell, the S&P, Dow, and Nasdaq all finished in the green, up 0.25%, 0.17%, and 0.22%, respectively.
Altcoin rally on Ether’s good news
Altcoin’s got a boost from the positive developments for Ether, with a large majority of tokens in the top 200 recoding gains on Tuesday.
Daily cryptocurrency market performance. Source: Coin360
Ethereum Name Service (ENS) was the top performer, gaining 29.3%, followed by an increase of 20.4% for SKALE (SKL), and a gain of 16% for Metis (METIS). Reserve Rights (RSR) was the biggest loser, falling 9.8%, while Arweave (AR) lost 9.3%, and Raydium (RAY) fell 7.7%.
The overall cryptocurrency market cap now stands at $2.57 trillion, and Bitcoin’s dominance rate is 53.1%.
