Markets
Why have regulators suddenly loosened their grip on cryptocurrencies?
Just a few weeks ago, news broke that the United States Securities and Exchange Commission (SEC) was preparing to sue Robinhood for allegedly violating securities laws with its crypto trading. Now the discussions revolve around the possible approval of a spot ETF for ETH.
Why this change?
Many believe that the sudden shift by regulators towards the digital asset market is linked to the impending US presidential election. Specifically, the ruling party could attempt to appeal to younger voters by taking a more lenient stance toward cryptocurrencies.
In pursuit of this strategy, the US Senate aligned itself with the House of Representatives by voting to repeal Staff Accounting Bulletin No. 121. This bulletin previously prohibited US banks from acting as custodians of digital assets of their clients.
However, it should be noted that the resolution did not have a sufficient number of votes to override a possible veto. Additionally, President Biden expressed concern that such repeal could undermine investor protections and the stability of the financial system.
What’s on the horizon?
The SEC will review ETH-based ETF applications from Vaneck and Ark Invest this Thursday and Friday. Carried by the recent rise in Ethereum prices and general market optimism, traders are expecting a green light for these applications.
However, the launch of a spot ETH ETF depends on the approval of two key documents: 19b-4 (relating to changes to stock exchange rules) and S-1 (the registration statement). Although approval of Form 19b-4 is expected, approval of Form S-1 may be delayed.
Furthermore, the US House of Representatives vote on HR 4763 later this month. If passed, this bill would place digital assets under the jurisdiction of the CFTC, classifying them as commodities if they demonstrate functionality and decentralization.
Will the market rally accelerate?
Currently, Bitcoin derivatives are showing moderate bullish sentiment, with demand for long BTC positions increasing via monthly futures contracts. On the other hand, the options market is not too optimistic despite the recent price rally.
If the Biden administration has indeed moved from an aggressive position on cryptocurrencies to a more dovish approach that rivals Trump’s approach, market sentiment could soar, potentially pushing the price of Bitcoin past $72,000.
However, prudent investors should conduct thorough research before making any financial commitment. They must always prioritize risk management and take technical indicators into account.
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade any commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no liability for loss and/or damage arising from the use of this publication.