Weekly Market Update - Friday, June 23, 2023

Takeaways

• Bitcoin Prices Rise: Bitcoin prices soared past $30K USD this week on news that BlackRock, Invesco, and other large traditional financial institutions applied to launch Bitcoin ETFs.
• New Bitcoin ETF Applications Promise More Transparency: Some of the new bitcoin ETF applications include what are known as surveillance-sharing agreements, which aim to address concerns the SEC has had in the past with similar applications. These agreements would provide more visibility into the underlying bitcoin markets.
• Rush of Activity in GBTC: There was heightened trading activity across bitcoin products spurred by the ETF filings, with the Grayscale Bitcoin Trust showing momentum.
• UK Interest Rate Hike: The Bank of England continued increasing its key interest rate as the United Kingdom struggles with stubborn inflation.
• First DAO Funded Film Features NFT Characters: The Rise of Blus: A Nouns Movie, what is thought to be the first DAO-funded film, was released this week, bringing NFT characters to the screen.

Sign up for a Gemini account

The secure way to buy, sell, store and convert crypto. Millions use Gemini to diversify their portfolios.

Get started

Bitcoin Breaks $30K USD Leading Crypto Rally as TradFi Firms File for Bitcoin ETFs

Bitcoin (BTC) surpassed $30K USD on Wednesday, hitting its highest level since April and gaining more than 18% this week. The rally was fueled by bitcoin exchange-traded fund (ETF) filings with the U.S. Securities and Exchange Commission (SEC) over the past week from traditional financial institutions including BlackRock, Invesco, WisdomTree, and Valkyrie. The approval of a BTC ETF would allow retail traders to purchase shares representing the value of BTC on major U.S. exchanges, like the Nasdaq.

The crypto rally was led by BTC, with BTC dominance rising to over 51%, its highest level since April 2021. Ether (ETH) and other altcoins rallied in sympathy, with ETH surpassing $1,900 USD. BTC had a similar rally in October and November 2021 when the first futures-based bitcoin ETF, BITO, sponsored by ProShares, was approved by the SEC.

Bitcoin ETF Applicants Focus on Spot BTC Surveillance-Sharing Programs

The inclusion of a Spot BTC Surveillance-Sharing Agreement in BlackRock’s ETF application is among the nuances differentiating it from previously rejected applications. This type of agreement would attempt to address concerns the SEC has had in the past with approving bitcoin ETFs. The surveillance sharing agreement is outlined in a filing by the Nasdaq, the venue where the BlackRock ETF would be listed.

Bitcoin ETFs have been rejected by the SEC for years, including a recent one filed by VanEck. The SEC has pointed to the potential for manipulation and shortcomings in surveillance of BTC markets as reasons for rejecting various applications. Instead, the SEC has preferred to approve futures-based ETFs, as the agency can monitor trading activity for futures listed on the Chicago Mercantile Exchange (CME).

A shared surveillance agreement would require the exchanges listing an ETF, like the Nasdaq or CBOE, to have access to the spot venue (a crypto exchange, or exchanges) where the underlying asset is traded. The type of information shared could include trading and clearing activity, as well as the identity of traders. Shortly after BlackRock’s filing, a few other ETF issuers followed suit and included a sharing surveillance agreement in revised filings.

Notable Trading Activity in GBTC After ETF Filings

With traders potentially betting on the increased likelihood of an approved bitcoin ETF, the Grayscale Bitcoin Trust (GBTC) discount to net asset value (NAV) tightened to ~33%, from as low as ~48% in December 2022. This discount represents the difference between the price of GBTC and the price of spot BTC.

GBTC is a closed-end fund, meaning no redemptions are currently permitted. Grayscale has previously said their goal is to convert GBTC to an ETF once the SEC approves one, which would then allow for the opening of redemptions.

Bank of England Continues to Raise Interest Rates Amid Stubborn Inflation

The Bank of England hiked its key interest rate by 50 basis points to 5% in a surprise decision on Thursday. This is the highest key interest rate level since April 2008. The magnitude of the move outpaces the actions of its G7 peers as the United Kingdom struggles to curb inflation that has reached double-digit percentages year-over-year in recent months. The UK's May consumer price index (CPI) showed an increase of 8.7%.

The British Pound (GBP) fell to 1.27 vs. the U.S. dollar (USD) despite the rate increase as the economic concerns outweighed the higher interest rate. The FTSE 100 declined 0.76% on Thursday.

First DAO-funded Animated Film Released

A pilot for the The Rise of Blus: A Nouns Movie was released this week, in what appears to be the first DAO-funded animated film. The project raised $2.75 million USD and includes animators who have worked at the likes of Netflix, Pixar, and Marvel.

The film was funded through a proposal passed in March by NounsDAO. It features characters based on 8-bit NFT characters known as Nouns. According to nft now, the film “centers around the lively floating cloud city of Blus, wherein a daring 13-year-old Noun uncovers a malevolent scheme by the city’s aristocrats.” The title character bands “together with a motley crew of unlikely allies (other Nouns) to thwart the threat and protect those they hold dear.”

-From the Gemini Trading Desk