Market Wrap: Bitcoin Rises Toward $50K on Hopes for US ETF Approval

Bitcoin strengthened on Monday as buyers attempted to push the price toward $50,000 for the first time since early September. The cryptocurrency is up about 15% over the past week as traders appear to be exiting short positions.

Analysts are waiting for the U.S. Securities and Exchange Commission (SEC) to approve a bitcoin exchange-traded product (ETF), which could happen in a matter of weeks.

Although SEC Commissioner Gary Gensler restated his preference for a futures-backed bitcoin ETF last week (rather than a so-called spot ETF that would hold physical bitcoin), some analysts expect an approval by the regulator could spark a year-end crypto rally.

“It would still open the floodgates for institutional adoption and hopefully result in a spot-backed ETF being approved in the not-so-distant future, which would allow ordinary people to include the asset easily” in their brokerage accounts, Marcus Sotiriou, sales trader at the U.K.-based digital asset broker GlobalBlock, wrote in an email to CoinDesk.

Latest prices

• Bitcoin (BTC), $49,308, +1.1%
• Ether (ETH), $3,411, -1.6%
• S&P 500: -1.3%
• Gold: $1,767, +0.3%
• 10-year Treasury yield closed at 1.484%

Still, some traders are cautious given the ongoing regulatory crackdown on cryptocurrencies. On Sunday, Nikkei reported that Japan’s tax authorities conducted a large-scale audit of several individuals. Later this month, the U.S. Treasury Department is expected to release a stablecoin report that could recommend bank-like regulations for stablecoin issuers.

Bitcoin short covering

Technical breakouts made by some cryptocurrencies last week led to “massive short covering,” according to a FundStrat report. Breakouts occur when demand for an asset exceeds supply, causing the price to rise above a particular resistance level. For bitcoin, the recent breakout level around $46,000 suggests traders are starting to exit short positions.

“My cycle composite shows bitcoin trending up into late November/December before peaking,” Mark Newton, managing director and head of technical strategy at FundStrat wrote in a newsletter last week.

“The current weekly cycle does show the potential for weakness into spring 2022 before the next major rally,” Newton wrote. “Thus, this current rally might prove to be tactical in nature before consolidation sets in and the larger rally might begin next year.”

FundStrat has an initial BTC upside target around $52,000.

Crypto funds draw $90 million in new money

Bitcoin-focused funds have attracted new capital for three straight weeks, after a period of outflows in recent months, CoinDesk’s Lyllah Ledesma reported.

Bitcoin-focused funds took in $69 million, according to a report published Monday by CoinShares. It was the third straight week of inflows for bitcoin funds, pushing the cumulative intake over the period to $115 million and cementing a trend reversal from the prior few months when redemptions were the norm.

Crypto funds focused on Ethereum, the second-largest blockchain, saw $20 million of inflows. Alternative digital assets appeared to show waning interest.

Altcoin roundup

• Axie Infinity’s AXS token hits record high: Axie Infinity’s token reached a record $153 days after the play-to-earn game announced it would distribute over $60 million worth of tokens to its early adopters and the launch of staking capabilities, reported CoinDesk’s Lyllah Ledesma. “Staking yields on AXS remained exceptionally lucrative (189% APR), even with 12.4 million AXS staked already and growing, leading to a real risk of a supply crunch for AXS,” said Denis Vinokourov, head of research at Synergia Capital. “This could result in exponential, albeit likely unsustainable, upside, and in the end leading to erratic and choppy price action.”
• Fed to launch CBDC review as early as this week: The U.S. Federal Reserve is set to initiate a review of the risks and opportunities of introducing a central bank digital currency (CBDC) as early as this week, reported CoinDesk’s Jamie Crawley. Chair Jerome Powell referred to the development of a digital dollar as “critical work” last week during a U.S. Senate Banking Committee hearing, adding that it would require legislation from Congress in order to proceed.
• DeFi lending protocol Compound’s woes continue as $66 million added to vulnerable contract: A faulty Compound Finance contract intended to disburse liquidity mining rewards over time was topped off with $66 million in tokens on Sunday morning, reported CoinDesk’s Andrew Thurman. About $22 million of those funds were then exploited due to the same bug that drained $80 million in tokens throughout the latter half of last week, per one DeFi developer, who told CoinDesk the remaining $44 million has now been determined to be at risk. The price of COMP has lost more than 5% in the last 24 hours and recently traded at $330.53.

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Other markets

Most digital assets in the CoinDesk 20 ended the day lower.

Notable winners as of 21:00 UTC (4:00 p.m. ET):

• Algorand (ALGO), +2.7%
• Dogecoin (DOGE), +2.6%

Notable losers:

• Stellar (XLM), -4.8%
• Uniswap (UNI), -4.1%