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The Comeback of Bitcoin: What Happened and What’s Next

Written by Kendrick Low

After Bitcoin’s spectacular rises and falls from grace in the third and second quarters of 2021 and 2022 respectively, it seems a comeback may now be on the charts. In a mere month, Bitcoin’s stock has surged 30%- and that’s just been sparked in the latter half of October. But why has the previously neglected coin seemingly skyrocketed? And what does this mean for financial markets in the future?

This apparent comeback, several major newspapers report, has been promoted by speculative optimism relating to ETFs. Essentially, this implies Bitcoin may soon have its own first spot ETFs- ETFs tracking the market price of Bitcoin itself, not simply Bitcoin futures, where investors and traders don’t necessarily have to hold the currency itself. As for the currently permitted Bitcoin futures contracts, they involve agreements by investors to trade a specific amount of Bitcoin in the future according to a set price. These investments do have more direct risk exposure, but also allow for more transparency. As spot Bitcoin ETFs are much less complicated and it is easier for investors to understand, signs that it is coming to the US at long last have stoked passion amongst traders worldwide.

According to the Gulf Times, Bitcoin is experiencing preliminary price increases in anticipation of an official statement from the US Securities and Exchange Commission (SEC for short), leading to a 30% rebound back to $35k after reports by Bloomberg Intelligence that BlackRock-owned iShares had released a Bitcoin trust with the ticker IBTC, listed on the Depository Trust and Clearing Corporation, which operates the clearing and settlements. This, Bloomberg analyst Eric Balchunas states, indicates that while it is not in the clear yet, it has been largely approved, ‘checking every box you need to check’, and, with the ticker added, it seems that the launch is imminent. Bitcoin surged 10% in a day, buoyed by the huge ETF hype. However, this was merely due to an ‘erroneous report’ where BlackRock had been cleared to launch a fund, and the market soon cooled after this discovery. After the US SEC ‘clampdown’ on cryptocurrencies due to the FTX collapse late last year, investors- and Bloomberg analysts- are betting that SEC approval, though, is ‘inevitable’,and that a slew of funds will be green-lit in the near future, though exact dates are still uncertain. Other cryptocurrencies have experienced mixed reactions, though, with Ether, the second-largest token, reaching $1800 ‘in Bitcoin’s slipstream’, while another popular currency, Solana, continued its decline, whereas memecoin Dogecoin did see a short-lived rise before the market calmed.

Additionally, it appears that there is another factor driving Bitcoin’s ascent in recent weeks, namely the recent uncertainty and turmoil. After the bond market fell into disarray in early October and with the Israel-Hamas war erupting mere weeks ago, causing sharp climbs in oil prices, CNN states investors are now viewing Bitcoin as almost a safe haven, likening it to ‘digital gold’, its namesake famously being used to hedge against inflation and uncertainty. Bitcoin has taken on a similar role, with investors pouring into the market. While definitely not as comparable to the current hype formed by BlackRock’s potential Bitcoin spot ETF, this trend has been rising steadily since October.

To summarise, while Bitcoin has certainly risen at rapid rates, the current trend is still purely speculative, and it is best to remain prudent during these potentially hazardous periods. In fact, to remove volatility, simply stick to tried-and-tested gold to reduce uncertainty in your portfolio, as well as spreading risk via diversification of stocks. For now, the current trend has placed Bitcoin firmly back in the public eye, and it will likely remain there for weeks to come.

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