Pro Market Keys Of The Week: BlackRock Files For A Bitcoin ETF
The world’s largest asset managed submitted an application for a spot bitcoin ETF. FOMC skips rate hike for the first time since March 2022. The bitcoin price sits just under a critical level.
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What We’re Watching
BlackRock Files For A Spot Bitcoin ETF
In a significant move, BlackRock Inc., the world's largest asset manager, submitted an application to the U.S. Securities and Exchange Commission (SEC) for a spot bitcoin exchange-traded fund (ETF). Named the iShares Bitcoin Trust, this ETF, if approved, will trade on Nasdaq with Coinbase Global Inc. serving as its custodian.
The submission follows about 30 failed attempts by other companies for a spot bitcoin product. It is crucial to note that the SEC has traditionally opposed these attempts at a spot bitcoin ETF, citing market instability and insufficient investor protections. The disclosure of BlackRock's application coincided with a 2.7% increase in bitcoin's price, sparking speculation about a possible victory for Grayscale Investments in its ongoing lawsuit against the SEC. A fun fact to consider here: BlackRock's record of getting ETFs approved by the SEC stands at 575-1.
Regarding BlackRock's Bitcoin ETF application, the SEC is slated to announce its decision by February 2024 in adherence to its standard procedural timeline. The process begins with the SEC having a 45-day limit from the filing date to publish the application notice in the Federal Register. This is then followed by a comment period of another 45 days, which allows stakeholders to provide their insights, and another 45 days is allotted for responses to these comments.
Should the ETF proposal pose concerns that demand examination from the SEC, the commision reserves the right to prolong the evaluation period by up to 90 additional days. In total, the review duration could extend to as long as 240 days. Based on previous spot bitcoin applications through the SEC, one might reasonably expect the process to drag on into 2024 before a final decision is made, although BlackRock’s application and presence in financial industry might help to reverse the trend.
Binance.US Secures Deal To Prevent Asset Freeze
Binance.US and the SEC reached a crucial agreement that prevents a total asset freeze on the platform amidst an ongoing lawsuit. As part of this agreement, Binance Holdings, BAM Management U.S., BAM Trading Services, and founder Changpeng "CZ" Zhao are to repatriate Binance.US customer assets, with the U.S. platform being restricted from spending corporate assets beyond operational costs.
The agreement effectively safeguards customer funds without the need to shut down the exchange, a welcome relief for the platform and its users. Regardless of the ongoing legal battle, Binance.US insists that customer assets are secure and maintains its stand against the SEC's suit.
This adds to a dynamic situation between Binance and U.S. regulatory authorities, due the opaqueness of the exchange’s practices, some of which we have detailed out in our recent full-length report, Binance Revisited: Warning Signs At The World's Largest Bitcoin Exchange.
CPI Aftermath: Fed 'Pauses' Hikes, Yet Signals Hawkish Outlook
The Federal Reserve decided to hold off on rate hikes in June, with a core CPI month-over-month increase of 0.4% and a non-core index month-over-month increase of just 0.1%, bringing about the lowest year-over-year figure in the consumer price index since March 2021. Despite this pause, the Fed signaled a hawkish outlook, with half of the FOMC participants planning for at least two more hikes this year, pushing borrowing costs to about 5.6%.
This has led many to call this FOMC decision a skip rather than a pause, with the rates market pricing in two more possible hikes to finish off 2023, and equity markets flirting with year-to-date highs, short-dated yields are at the highest levels in more than two decades.
Despite history suggesting that recessions and equity market drawdowns typically occur as the Fed begins to cut rates (due to deteriorating economic conditions), there are also parallels that point to favorable equity market prospects over the interim, as there have been six instances since 1970, where the Fed increased rates by more than 100 basis points over a year then paused for at least three months, resulting in an average S&P 500 Index rise of 8.2% in the following 90 days.
Price Hangs Below Critical Levels
For looking at major swings in price momentum, we like to use both the short-term holders’ realized price from on-chain data and the 200-weekly moving average. Both now sit around $26,500 as price has failed to break and sustain above these levels over the last week. The next significant move will likely determine the trend over the next few months. Although we only have a few cycles to compare, 2018 is an interesting analog to see how price action rallied from market lows only to range and see another selloff over the next two years.
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