The rebound in digital assets this year can be mostly attributed to the premier digital currency outperforming other cryptos
In the first half of 2023, Bitcoin witnessed a resurgence, reclaiming 50% dominance of the total crypto market capitalization, a level it last attained in Q2 2021. During that period, Bitcoin started losing its dominance to platform chains that supported emerging trends like DeFi, NFTs, and gaming. The recent resurgence of Bitcoin can be attributed to a combination of technical advancements and a favorable regulatory environment.
After a prolonged period of inactivity, Bitcoin is currently undergoing a technical renaissance. The introduction of inscriptions and BRC-20 tokens has brought forth a new ecosystem built on top of Bitcoin, leading to increased user growth and engagement. This surge in activity has sparked interest in the development of Layer-2 solutions for Bitcoin, with Stacks and Rollkit taking the lead. Previously excluded from the excitement, Bitcoin is now actively participating in speculative trends such as NFTs and meme coins.
At the same time, Bitcoin’s price action is being bolstered by the regulatory environment. Several traditional finance giants, including Blackrock, Fidelity, ARK Invest, and Invesco, have submitted a flurry of ETF applications (figured below). While previous applications for spot ETFs were rejected by the SEC, the stature of these applicants increases the likelihood of success.
Consider the example of the ETF application from Blackrock. Their remarkable success rate, with 99.86% of their ETF proposals receiving approval (575 out of 576), is keeping the investors optimistic. The approval of the first Gold ETF back in 2003 served as a catalyst that propelled Gold into a multi-year bull run. As the probability of Bitcoin ETF approval rises, the discount on the Grayscale BTC (GBTC) has also diminished. In June, the GBTC discount decreased from 42% to 30%.
Moreover, there is a noticeable effort by global authorities to offer clearer regulations within the cryptocurrency space. Any regulatory clarity, as long as it doesn’t result in an outright ban, can be viewed as beneficial for Bitcoin. Additionally, Bitcoin, being the most decentralized cryptocurrency without a founder, supporting foundation, or dedicated development team, is less likely to be negatively affected by crypto regulations.
A notable example in the recent lawsuit by the SEC against Coinbase and Binance is the omission of both Bitcoin and Ethereum being labeled as securities. Bitcoin has often been exempted or treated differently in regulatory discussions compared to other crypto assets. Its status as a separate asset class and its popularity among investors and users have contributed to its resilience and continued adoption, even in the face of regulatory challenges.
A lot can happen in the cryptoverse in a matter of a week. And this is exactly what we saw this week. On June 28, MicroStrategy announced the corporate purchase of 12,333 Bitcoin worth $347 million at the time of publication. This was followed by the world’s largest asset manager, BlackRock filing for a BTC Spot ETF in the U.S. These developments took the Bitcoin to test $31,000.
Earlier today, Wall Street Journal reported that the SEC considered the recent filings as “inadequate,” leading to speculation about potential rejection, similar to previous ones. This news prompted an immediate sharp price drop for BTC, causing it to decline by $1,500. Consequently, the asset reached a 10-day low of $29,500. However, it managed to recover relatively swiftly and regained some ground.
Despite the bounce-back, its current position remains uncertain, hovering around $30,000. After all, volatility has been a hallmark of crypto price action. And this move was no surprise. The overall picture for Bitcoin still remains constructive, but it needs to confirm a firm break of $31000 to trigger another upleg in the recent bull run.
Originally Published on Medium