Data from CryptoCompare shows that the price of Bitcoin opened last week above $47,000 and moved sharply upward to surpass $56,000 sparking numerous bullish calls from analysts and taking its market capitalisation above $1 trillion.
Ethereum’s Ether – the second-largest cryptocurrency by market capitalisation – moved from around $3,300 to a $3,600 high while enduring numerous dips throughout the week. At the time of writing, it was moving above $3,550.
Headlines in the cryptocurrency space this week were heavily influenced by Bitcoin’s price rise, which first started on rumours the US Securities and Exchange Commission (SEC) would approve an exchange-traded fund (ETF) tracking the price of Bitcoin through futures contracts.
Instead, the SEC approved an ETF that provides investors with exposure to BTC through a portfolio of companies with significant exposure to the cryptocurrency. The ETF – called the “Volt Bitcoin Revolution ETF” – filed its initial application in June.
Volt Equity, the firm managing the fund, said a significant portion of its assets would be made up of MicroStrategy shares, which has more than $6 billion in BTC on its balance sheet. The ETF consists of approximately 30 companies, including Tesla, Square, Coinbase, PayPal, and Twitter.
Demand for cryptocurrencies in general seems to have soared, with perpetual basket products on crypto exchange FTX growing in popularity over time.
The SEC still has to decide on a number of Bitcoin ETFs, and proponents believe one may still be approved this year.
SEC Chair Gary Gensler said this week that the country was not following in China’s footsteps in banning cryptocurrencies, but instead noted the government is focused on ensuring the industry adheres to investor and consumer protection rules.
Gensler’s comments came at a House hearing after a Republican lawmaker asked if a China-like ban on cryptocurrencies was a possibility in the United States. Gensler answered the country has a “quite different” approach, and that any ban would have to be legislated by Congress.
Institutions keep betting on crypto
Adding to all of this, the fifth-largest retail bank in America – US Bank – announced its cryptocurrency custody service was now available to fund managers. Early in the week, the global division of the second-largest bank in the United States, Bank of America, published a report describing itself as “bullish” on the cryptocurrency ecosystem, saying it’s “too large to ignore”.
The report says that the financial giant’s global research division believes cryptocurrencies “could form an entirely new asset class” and that Bitcoin “is important with a market value of ~$900 billion”, but there was more to it, adding that in the near future “you may use blockchain technology to unlock your phone; buy a stock, house or fraction of a Ferrari; receive a dividend; borrow, loan or save money; or even pay for gas or pizza”.
The Federal Deposit Insurance Corp (FDIC), a key banking regulator, is also eyeing the cryptocurrency space, as it’s studying whether certain stablecoins might be eligible for its coverage. The discussions are preliminary, but sources suggest the agency is analysing what pass-through FDIC Insurance may look like for the reserves stablecoin issuers hold at banks.
Finally, a note JPMorgan shared with clients suggests Bitcoin’s recent price rise above the $50,000 mark was predominantly driven by institutional investors looking for a hedge against inflation and preferring BTC over gold.
The note says the re-emergence of inflation concerns among investors has renewed interest in using the flagship cryptocurrency as an inflation hedge, to the point it’s siphoning investors away from gold.
USDC stablecoin backer Circle under investigation
Circle, a key supporter of the popular USDC stablecoin, is under investigation by the SEC. According to regulatory filings, the company received an “investigative subpoena” from the regulator’s Enforcement Division in July 2021.
The regulatory filings show the subpoena request “documents and information regarding certain of our holdings, customer programs, and operations”. Circle said it was fully cooperating with the investigation.
Leading stablecoin issuer Tether was found to have reportedly lent “billions of dollars more to other crypto companies, with Bitcoin as collateral”. One of those companies was Celsius Network. Tether’s USDT stablecoin currently has a supply of more than $70 billion in circulation but its backing has been controversial.
The CEO of the cryptocurrency lending platform Celsius, Alex Mashinsky, reportedly said the firm had $1 billion of USDT lent to it, and pays an interest rate of five to six per cent on the funds.