2023-12-01 14:15

Some analysts expect bitcoin to mature into a less volatile asset following the introduction of spot ETFs in the U.S, while others say potential "cash creation" structures will increase volatility. Spot ETFs could reduce the influence of crypto whales in the market, helping bitcoin become less volatile, analysts said. In traditional markets, spot ETFs tend to boost liquidity in the underlying asset. One observer said volatility may remain high if the expected ETFs involve "cash creation." The U.S. Securities and Exchange Commission (SEC) is widely expected to greenlight one or more exchange-traded funds (ETFs) that invest directly in bitcoin (BTC) rather than in futures tied to the cryptocurrency. Analyst consensus is that approval will have a bullish impact on prices. Analysts disagree, however, on whether approval will subdue bitcoin's notorious price volatility, which has dented its appeal as a haven asset. While the Bitcoin blockchain is decentralized, its token, BTC, is concentrated in the hands of a relatively small number of owners, known as whales. Because of the size of their holdings, these whales hold great influence over prices, often triggering violent swings. A spot ETF, which is supposed to track the value of the underlying assets closely, could trim their influence by broadening the owner base. "A spot ETF would provide bitcoin exposure to a much wider swath of market participants, including institutional investors and financial advisors," Nate Geraci, the president of registered investment adviser The ETF Store, said in an interview conducted over direct messaging on X. "A deeper pool of bitcoin investors via the ETF wrapper could theoretically help lower volatility since there would be a greater number and diversity of investors. That should make it more difficult for larger bitcoin whales to push prices around." According to estimates from Galaxy Digital, the addressable market size of a U.S. bitcoin ETF could be $14 trillion in just one year after the spot ETF launch, and $39 trillion in the third year. More liquidity Such a strong uptake could boost liquidity in the underlying asset, ensuring less volatile trading conditions where prices don't fluctuate rapidly. Liquidity refers to the ability of a market to absorb large orders at stable prices. "Volatility tends to drop as the space matures, more institutional liquidity and infrastructure develops, and the asset acclimates to normalcy," Richard Rosenblum, co-founder and president at crypto liquidity provider GSR, said over Telegram. In the equity markets, an increase in ETF ownership tends to boost liquidity in the underlying stocks, according to a 2018 paper by Mehmet Saglam, associate professor of finance at the Carl H. Lindner College of Business at the University of Cincinnati; Tugkan Tuzun, an economist at the Federal Reserve Board and Russ Wermers, associate professor of finance at the Smith School of Business. "Using several measures of liquidity, we find that ETFs increase the liquidity of their underlying stocks. We find that illiquidity measures, effective spreads, quoted spreads, Amihud, and implementation shortfall all increase when the ETF ownership of the stock goes down," according to the paper, which examined S&P 500 and Nasdaq stocks. "Examining the price dynamics over large order executions, we find that one primary channel of higher liquidity is due to arbitrageurs trading against potential mispricings between the ETF and the basket of underlying stocks," the paper said. Arbitrageurs take offsetting positions in two markets to profit from pricing differences between them. For instance, if an ETF trades at a discount to the value of the underlying stocks, an arbitrageur will buy the ETF and sell underlying stocks, effectively adding liquidity to the underlying assets. Volatility due to cash creation Laurent Kssis, an ETF expert and crypto trading adviser at CEC Capital, takes the opposing position, arguing that spot ETFs could become a source of BTC price volatility. ETFs are created and redeemed in kind or in cash. The widely used in-kind creation involves authorized participants (APs) depositing a basket of securities with the issuer in exchange for new ETF units. Under cash creation, APs provide cash and the issuer purchases the actual asset. According to Kssis, in cash creation, the issuer is exposed to the difference between the prices at which assets have been acquired and the daily reference price at which the net asset value (NAV) is calculated. "We need a reference price where we audit the fund to calculate the NAV," Kssis said in a Telegram interview. "With in-kind creations, APs purchase assets and deliver them to the issuer. With cash creations, if the issuer manages to buy them cheaper, then it makes a little profit, but if it buys them higher, it coughs up the excess." "Hence, at the time of fixing, you will have more arbitrageurs trading around that time channel and creating volume to either push the market or trade discrepancies between the cash and futures price of bitcoin, effectively creating volatility inadvertently during that period," Kssis added. Recently, there were rumors on the X that the SEC wants the ETF applicants to work through cash creation. https://www.coindesk.com/markets/2023/12/01/gauging-spot-bitcoin-etfs-impact-on-price-volatility/

2023-12-01 10:56

The suit was filed in September 2022 by Julian Moreno Beltran and Douglas Gan on behalf of 375 others, who claim they lost a combined $57 million. Terraform Labs and its founder, Do Kwon, may be hit with a class-action lawsuit in Singapore after the High Court dismissed an attempt to have it thrown out, Business Times reported on Thursday. Terraform lawyers tried to shift the action to an arbitration process, citing the website's terms of use, according to the Business Times. The lawyers claimed users had foregone the right to trial and to join a class-action suit. The court ruled otherwise. "To our knowledge, this is the furthest a class-action suit has progressed in the world," Mahesh Rai, a director of Drew & Napier, which represents the claimants, said in an interview. "Now we are approaching discovery stage." The suit was filed in September 2022 by Julian Moreno Beltran and Douglas Gan on behalf of 375 others, who claim they lost a combined $57 million. The claimants are alleging fraudulent misrepresentation by Terraform Labs, Do Kwon and his co-founders in their promotion of the algorithmic stablecoin terraUSD (UST), which led them to purchase and stake the tokens and hold on to them as UST lost its peg to the U.S. dollar in May 2022 and plunged to less than $0.10. Terraform also faces charges of fraud in the U.S. brought by the Securities and Exchange Commission, which alleges it was selling unregistered securities. In October, Terraform asked for this case to be dismissed on the grounds that the regulator had been unable to make its case. The company did not immediately respond to CoinDesk's request for further comment. Read More: Do Kwon’s Extradition Approved by Montenegro Court https://www.coindesk.com/policy/2023/12/01/terraform-labs-do-kwon-fail-to-have-singapore-class-action-suit-rejected-report/

2023-12-01 10:52

Overall crypto market capitalization is at its highest level since May 2022 with nearly $400 billion added since the start of October. Bitcoin rose to $38,800 for the first time since May 2022 during European morning hours on Friday, continuing its strong multi-month uptrend buoyed by expectations of institutional demand. The asset added nearly 3% in the past 24 hours, mirroring an uptick in global stock markets. Futures of U.S. indices S&P500 and Dow Jones jumped 0.17% higher in premarket trading, while European index Stoxx 600 added 0.52% since Friday’s open. The price jumps come as euphoria around a planned spot exchange-traded fund (ETF) in the U.S. heats up and on-chain behavior suggests a significant amount of the asset has been moved to cold storage – indicating demand and a lack of imminent sell pressure. Strength in bitcoin also helped a bump in overall capitalization, which crossed the $1.5 trillion mark on Thursday and has added $400 billion since the start of October. Strong narratives in artificial intelligence, layer 1 blockchains, and gaming have aided growth in large-cap tokens – with prices of Solana’s SOL and Avalanche’s AVAX more than doubling in the past two months. Meanwhile, some market watchers said bitcoin could see muted growth as December progresses. “In terms of seasonality, December is considered a relatively neutral month of the year, adding half the time over the past 12 years,” Alex Kuptsikevich, FxPro senior market analyst, said in an email. “The average gain is 30.8%, while the average decline is 12.8%.” https://www.coindesk.com/markets/2023/12/01/bitcoin-rises-to-388k-for-the-first-time-since-may-2022/

2023-12-01 09:41

COIN reached its highest level since April 2022 on Monday and remains at 19-month highs. Cathie Wood's investment management firm ARK Invest has made its third sale of Coinbase (COIN) stock this week, dropping 37,377 shares worth almost $4.7 million at Thursday's closing price. Along with sales on Nov. 27 and Nov. 29, ARK has sold around $15 million worth of COIN shares this week from its Next Generation Internet ETF (ARKW). The crypto exchange's Nasdaq-listed shares reached their highest level since April 2022 at the start of the week, touching $119.77 on Monday. They fell 2.43% on Thursday to close at $124.72, but nonetheless remain at 19-month highs. It is a frequent play of ARK Invest to accumulate crypto-related shares when they have seen a downward trend and then offload them when they turn bullish to bank some profits. Read More: ARK Invest Sold $5M Worth of Grayscale Bitcoin Trust Shares Last Week https://www.coindesk.com/business/2023/12/01/cathie-woods-ark-invest-offloads-a-further-47m-worth-of-coinbase-shares/

2023-12-01 07:56

Data shows over $1 billion worth of BTC has been withdrawn from exchanges over the past week. The case for a continued rally in bitcoin (BTC) to $40,000 and higher by the year-end has strengthened, with centralized exchanges recently witnessing a sizeable exodus of coins. Data by Glassnode shows just over 37,000 BTC, worth $1.4 billion, has been withdrawn from exchanges since Nov. 17 in a sign of investors taking direct custody of their coins. The outflow likely represents a bias for a long-term holding strategy, although some of it could have stemmed from Binance's guilty plea. The bias for holding means strong demand and weakening sell-side pressure in the market amid euphoria from an expected launch of a spot exchange-traded fund (ETF) in the U.S. Exchange outflows have historically marked local price lows, supporting expectations of a medium-term price rise. BTC traded above the $38,800 mark early Friday, leading to gains in the broader crypto market, with some major tokens jumping as much as 5% in the past 24 hours. Overall market capitalization rose to $1.5 trillion – a level last seen in May 2022 – adding some $400 billion since the start of October. Some market watchers say expected rate interest cuts by central banks in the months ahead could generally attract capital to markets – leading to more volatility in speculative markets such as cryptocurrencies. "The Federal Reserve has paused its rate hiking cycle and central banks around the world are following," Anthony Rousseau, head of brokerage at TradeStation, told CoinDesk in an email. "It's plausible to believe we have reached the heights of this tightening cycle. For risk assets to get a sustained bid we will need to see a path forward with lower rates and an end to Quantitative Tightening." "We are potentially entering in 2024 an opportunity for a net positive liquidity for the markets. Bitcoin is a pure reflection of net liquidity in the markets, and we would need to see positive liquidity to support any substantial bullish activity," Rousseau added. Bitcoin momentum started to rise late Tuesday as Federal Reserve governor Chris Waller said recent data suggested a slowdown in the economy and continuing moderation in inflation showed current policies were in the "right spot." Waller also said that if inflation were to continue to decline, there's a good argument to be made for rate cuts within a few months. Interest rate decisions tend to move markets. Higher rates usually mean risk assets such as stocks and cryptocurrencies take a hit as investors could take profits and invest in bonds. We may earn a commission from partner links. Commissions do not affect our journalists’ opinions or evaluations. For more, see our Ethics Policy. https://www.coindesk.com/markets/2023/12/01/bitcoin-eyes-40k-as-1b-in-btc-withdrawals-suggests-bullish-mood/

2023-11-30 21:47

Republican Rep. French Hill and Democrat Rep. Jim Himes see potential future floor votes for crypto bills being key to convincing the Democrat-controlled Senate to play ball. Republicans had hoped to get U.S. crypto legislation through the House this year, but key lawmakers are now targeting 2024. A Democrat who has negotiated on the legislation said success in the House may move the Democrat-controlled Senate. After months of hoping U.S. crypto legislation could win House of Representatives approval this year, lawmakers doing much of the behind-the-scenes work are looking to 2024 as the time when digital assets bills may get passed by that Republican-controlled chamber though the efforts still face an uphill climb in the Senate where Democrats have the reins. U.S. Rep. French Hill (R-Ark.), the chairman of the House Financial Services Committee's subcommittee that focuses on digital assets, said the House's consideration of two major crypto bills – one to regulate U.S. stablecoin issuers and another to form a broad system of rules for crypto markets – has likely shifted into "early 2024." The House Republicans' recent fight over installing a new speaker – which ensnared key crypto negotiator Rep. Patrick McHenry (R-N.C.) as stand-in speaker for a time – delayed the floor time lawmakers needed for the legislation, Hill said at a Blockchain Association event in Washington on Thursday. "That, I think, set us back a little bit," echoed Sen. Cynthia Lummis (R-Wyo.) at the same event. Lummis, who has been pressing her own wide-ranging crypto legislation in the Senate, also suggested that the stablecoin bill, specifically, will make more progress next year. "That is an area that could come early in 2024."Rep. Jim Himes (D-Conn.), who has also occupied a leading role in the House negotiations for both bills as the committee's top Democrat Rep. Maxine Waters (D-Calif.) withdrew support, suggested the industry needs to counter what House Democrats are hearing from outside groups and U.S. Securities and Exchange Commission Chair Gary Gensler – a dedicated critic of the industry. He was among a handful of Democrats on the House Financial Services Committee to buck his party's ranking member on the committee to favor both crypto bills this year. Waters has since indicated she's still open to moving forward on legislation, and Himes said Thursday that if Waters gets on board and the overall House approves a bill, "a Democratic Senate sits up and takes notice." "On the other side of the Capitol, the weather is uglier," Himes said of the crypto views of some Senate Democrats, including Sen. Sherrod Brown (D-Ohio), who runs the Senate Banking Committee. "You could see a path, but I think it probably starts with a strong bipartisan vote" in the House, Himes said. Brown's banking committee "has been a tough nut to crack," said Lummis, who is a member of that panel. But she said the fact that the U.S. Department of the Treasury recently came forward with crypto illicit-finance policy proposals is a good sign that the administration is now willing to negotiate, which could nudge the Senate Democrats, too. Hill argues that the implosion of FTX last year and the recent massive settlement and criminal conviction of Binance, which may give some lawmakers pause about the sector, should actually encourage pursuit of the legislation. He said each example of bad behavior "only reinforces that we need to do this and do it the right way." Having no regulations in place "is what's going to advantage illicit finance." So, even if a crypto bill passes the House next year, it still needs approval in the Senate and a presidential signature. In practical terms, that may require plugging it into a more complex package and attaching it to must-move legislation, such as a spending bill. "Passing laws takes time," Sen. Kirsten Gillibrand (D-N.Y.), who has partnered with Lummis on crypto legislation, warned the industry crowd on Thursday. "Not that many people care about cryptocurrency," Gillibrand argued, advising the industry to keep educating people. "The rest of the country doesn't know what you're doing." https://www.coindesk.com/policy/2023/11/30/republicans-leadership-squabbles-delayed-us-crypto-bills-until-2024-key-lawmakers-say/