The weekend brought another rally to the cryptocurrency market as investors speculated that a bitcoin (btc 5.79%)Investment fund (ETF) could be imminent. And if an ETF is approved, there could be a flood of investors entering the market.
Values โโare rising across the crypto industry, but the big names are advancing more than usual today. Bitcoin is up 5.6% since the market close on Friday. Ethereum (ETH 3.20%) has gained 4.9%, solarium (SUN 3.22%) has gained 9.8%, and Dogecoin (DOGE 6.37%) has advanced 6.7%.
Cryptocurrencies rally on hope for ETFs
No Bitcoin ETF has been approved yet, but investors are positioning themselves for when that day comes. The theory is that an ETF will attract new investors to cryptocurrencies, including institutional investors who may not want to take on the custody risk of cryptocurrencies but are interested in owning the assets.
There was a brief period of time last week when investors thought that Black Rock Bitcoin ETF and tokens approved jumped in value when that happened. This was more speculation than actual demand for Bitcoin, so the move did not last.
Coinbase seeks more clarity
There is also a submission deadline tomorrow for Coinbase (CURRENCY 3.42%) to provide a response to the Securities and Exchange Commission's (SEC) rebuttal to the company's motion to dismiss a major enforcement action. The SEC says Coinbase is selling securities, which the company disputes, and Coinbase is trying to get the case dismissed.
It is no coincidence that Coinbase is the custodian of some of the ETFs that have been requested. The company has one of the most advanced infrastructure in the crypto industry and in addition to offering exchange solutions for institutions, it also provides solutions for ETFs.
If the case is dismissed, it is difficult to see how the SEC could continue to curb Bitcoin and other cryptocurrency ETF applications.
ETF speculation generates volatility
The cryptocurrency industry is still seeking regulatory clarity in the US, and ETFs have become an indicator of the industry's current standing with regulators. Based on the major financial institutions now applying for Bitcoin ETFs, it certainly seems likely that they are confident they will get approval.
If the Bitcoin ETF is approved, the floodgates could open to other tokens. Ethereum, Solana and even Dogecoin could see new investors, including institutions, investing in ETFs. The market may be speculating on these approvals and that is what is driving prices today.
I think the biggest impact of regulatory certainty would be increased investment in the crypto industry. Blockchain is fundamentally a technology that could drive new businesses and ways of making contracts and storing information, but regulators need to make sure companies know what is legal and what is not. That is why there is so much speculation about the current regulation.
Volatility will continue to be common in cryptocurrencies until we know the certainty of both ETFs and the SEC's stance on major tokens. I think we're seeing the industry move toward more approvals, but battles may have to go to court, and we're still years away from being certain.
Travis Hoium has positions in Coinbase Global, Ethereum and Solana. The Motley Fool positions and recommends Bitcoin, Coinbase Global, Ethereum, and Solana. The Motley Fool has a disclosure policy.
