ETF ould attract investors reluctant to buy the high-risk cryptocurrency directly
BlackRock’s plans for a bitcoin fund have helped push the world’s largest cryptocurrency to its highest in a year, but rising interest rates and a regulatory crackdown could choke off the rally, analysts and industry insiders say.
The industry has been hit by a loss of investor confidence and heightened regulatory scrutiny this year after a series of collapses at major crypto firms in 2022 left investors saddled with losses. “Sticky inflation and economic recession concerns are still longer-term risks that we have to be cautious about,” said Youwei Yang, chief economist at bitcoin miner BTCM.“From our perspective, and based on conversations with sell-side desks, this rally was led by institutional buyers,” said Wes Hansen, head of trading and operations at crypto hedge fund Arca.
“The market is now pricing an ability to put a significant amount of fiat - if there is the volition to do so - into bitcoin, and that is such a significant development.” “In previous spot ETF rejections, the SEC has cited concerns about market manipulation, and BlackRock’s application appears to take a different approach to address this sticking point,” said Riyad Carey, a research analyst at Kaiko.After surprise rate hikes in Australia and Canada, and as the Federal Reserve forecasts two more hikes, investors are now betting that interest rates will remain higher for longer.
Analysts say prices have also been depressed by regulatory uncertainty, as the SEC is increasingly cracking down on what it sees as a culture of rule-breaking across the industry. The SEC earlier this month sued major exchanges Coinbase and Binance.
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