Bitcoin blazes ahead as institutions dive in, while Vanguard rejects it and regulatory challenges remain
DATA from CryptoCompare shows that the price of Bitcoin surged by nearly 10% over the past week to surpass the $67,000 mark, after testing its support level around $60,000 numerous times over the past few weeks.
Ethereum’s Ether, the second-largest cryptocurrency by market capitalisation, saw similar price performance, moving up around 6% over the same period to now trade at $3,100 after breaking through its resistance around the $3,000 mark.
The cryptocurrency has been noticeably underperforming Bitcoin, with market observers pointing out that expectations spot Ether exchange-traded fund (ETF) will be rejected by the US Securities and Exchange Commission (SEC) are negatively affecting ETH’s price.
Headlines in the cryptocurrency space over the week focused on Bitcoin’s advance, with data shows that mining difficulty on the Bitcoin blockchain saw its largest decline since the crypto bear market of late 2022, with a 6% drop that analysts suggested was a positive development for miners.
The difficulty dropped after the recent halving event, amid lowering BTC prices before the recent rise, and with a near-doubling of mining equipment costs that banded together forced higher-cost mining operations to shut down, reducing the computing power backing the network.
The mining difficulty drop has seen the costs of mining a single Bitcoin drop to around $45,000, according to estimates from analysts at JPMorgan, who noted the figure was down from over $50,000.
Notably while mining costs and hashrate dropped, more investments in spot Bitcoin exchange-traded funds were revealed. Over the week, filings with the SEC showed that the U.S. state of Wisconsin became the first US government entity to invest in BTC, purchasing 94,562 shares of BlackRock’s iShares Bitcoin Trust (IBIT), worth nearly $100 million, in the first quarter of the year.
Similarly, filings from JPMorgan have revealed an investment of over $730,000 in BlackRock’s IBIT, Bitwise’s BITB, Fidelity’s FBTC, and Grayscale’s GBTC, while Wells Fargo disclosed over $140,000 in GBTC holdings. BNP Paribas and BNY Mellon have also made similar disclosures.
Meanwhile, El Salvador’s Bitcoin holdings hit 5,750 BTC as the country has been leveraging geothermal energy from its volcanoes to mine more Bitcoin, having added 474 coins from its mining operation since 2021.
Interest in Bitcoin has grown to the point the world’s leading derivatives exchange CME Group is set to launch spot Bitcoin trading. The exchange already offer Bitcoin derivatives contracts, and offering spot trading would allow existing holders to engage in basis trades, a common strategy for professional traders.
Vanguard’s new CEO rules out spot Bitcoin ETF launch
Despite the significant interest in spot Bitcoin exchange-traded funds and the flagship cryptocurrency itself Salim Ramji, who is set to become the Chief Executive Officer of Vanguard on July 8, has recently stated the firm has no plans to introduce its own spot Bitcoin ETF.
In an interview, Ramji emphasised the importance of alignment between a firm's products and its core values The firm has not only not launched its own spot Bitcoin ETF, but it controversially doesn’t offer its clients trading access to the funds launched in the United States.
Nevertheless, Bitcoin exposure is set to indirectly enter a lot of portfolios as the Nasdaq-listed business intelligence firm MicroStrategy, the largest corporate holder of Bitcoin with over $13 billion worth of BTC on its balance sheet, is set to be added to the MSCI World Index.
The firm will join the index at the end of May, and will grow indirect exposure to traditional investment portfolios, given that billions of dollars track or are benchmarked against the MSCI World Index.
US Senate votes to overturn SEC rule on banks
Over the week, lawmakers in the United States voted to pass a joint resolution aiming to overturn the SEC’s rule affecting financial institutions doing business with cryptocurrency firms.
The resolution aims to nullify Staff Accounting Bulletin No. 121, which mandates that banks must keep customers' digital assets on their balance sheets and maintain sufficient capital against them, something that many lawmakers and industry leaders see as stifling innovation.
The resolution has already passed the US House of Representatives and now faces a potential veto from President Joe Biden, who has expressed concerns about investor protection and the stability of the broader financial system.
Should the President veto the bill, it would return to Congress where it would require a two-thirds majority in both houses to override the veto.
This week also saw the SEC reject the efforts of Nasdaq-listed cryptocurrency exchange Coinbase to force the creation of a new regulatory framework for the cryptocurrency space “from the ground up.”
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.
