Key Points
- Bitcoin (BTC) surged by 8.5% to reach $71,926 on May 21, nearing its all-time high.
- The U.S. Senate’s decision to overturn SEC’s Bulletin 121 could lead to the approval of an Ethereum spot ETF, boosting the cryptocurrency sector.
Bitcoin (BTC) experienced a substantial increase of 8.5% within a single day, reaching $71,926 on May 21.
This puts Bitcoin just 2.5% away from its highest recorded value.
Additionally, BTC derivatives are indicating promising conditions for surpassing previous records in the coming weeks.
Factors Driving the Surge
The significant daily increase in BTC’s value seems to be driven by increasing optimism around the potential approval of a U.S. spot Ethereum exchange-traded fund (ETF) and a market trend seeking inflation protection.
This same trend has also pushed gold and the S&P 500 to new all-time highs.
Traders are questioning whether the recent price surge in Bitcoin was fueled by the excessive use of leveraged long positions and the potential implications of a spot Ether ETF.
Regulatory Shifts and Crypto Market
On May 20, Eric Balchunas, a senior Bloomberg ETF analyst, increased the approval odds for the Ethereum spot ETF from 25% to 75%, influenced by political pressure.
The U.S. Senate’s decision on May 16 to overrule SEC’s Bulletin 121, which imposed strict capital requirements on banks holding customer digital assets, prompted this adjustment.
Before this vote, President Biden had hinted at using executive power to veto any resolution reversing the SEC’s policy.
However, the Senate’s decision favoring cryptocurrency adoption led to a strategic reevaluation at the White House, according to Perianne Boring, the founder and CEO of the Blockchain Trade Association Digital Chamber.
The SEC’s chair, Gary Gensler, had previously shown considerable reluctance to classify Ethereum as a non-security or to hint at any likelihood of approving its spot ETF.
However, the landscape shifted dramatically when the SEC reportedly requested updates to the spot Ethereum ETF filings from exchanges like NYSE and Nasdaq.
Despite potential competition from Ethereum, the introduction of its spot ETF is likely to be broadly beneficial for the cryptocurrency sector, fostering a more favorable environment for investment.
The diminishing anti-crypto regulatory stance in the U.S. could encourage more investment managers, including pension funds, to adopt a more favorable view of the sector.
The increase in Bitcoin’s value also triggered an increase in demand for BTC long positions through monthly futures.
Data shows that the BTC futures premium has climbed to 14%, the highest in five weeks, indicating moderate bullish sentiment.
The current -8% skew in Bitcoin options markets reflects a healthy market sentiment, especially considering that the BTC price has increased by 23% in 19 days while the options market has remained relatively stable.
The Bitcoin derivatives market data suggests that there is still room for strategic leverage among Bitcoin buyers without the fear of excessive optimism.
According to a popular crypto analyst, the bullish momentum could catapult Bitcoin up to $80,000 given “key moving averages” and “channel support.”
