Bitcoin's meteoric five-week rally, driving its price up by nearly 40%, has hit a temporary pause around the $37,000 mark. With excitement waning over the potential approval of a spot Bitcoin ETF, investors are now turning their attention to the upcoming Consumer Price Index (CPI) report set to be released today. Economists expect the October CPI figures to reveal a slowdown in monthly and yearly inflation rates, though both would still remain above the U.S. Federal Reserve's 2% target. The report's impact on Bitcoin is uncertain, as it could either provide a boost if inflation slows more than expected, or lead to a pullback if inflation surges, prompting investors to reconsider their asset allocations.
Meanwhile, the United States Securities and Exchange Commission (SEC) is on the verge of potentially approving all 12 pending spot Bitcoin exchange-traded fund (ETF) applications by Nov. 17. However, even if these approvals come through, investors may need to wait over a month before these products become available for trading, owing to the two-step process required to launch an ETF. This development is seen as a significant milestone in the path toward mainstream cryptocurrency acceptance. In addition to Bitcoin, Ethereum is also taking center stage, as asset management giant BlackRock seeks SEC approval for an Ethereum-focused ETF. BlackRock's move reflects a broader trend, with several other firms, including VanEck, ARK, 21Shares, Invesco, Grayscale, and Hashdex, seeking approval for Ethereum ETFs, highlighting Ethereum's growing prominence within the cryptocurrency ecosystem.
Bitcoin Holds Steady as CPI Report Looms: Will Inflation Data Fuel a Rally or a Retreat?
After an impressive five-week rally that saw the price of bitcoin (BTC) surge by nearly 40%, the world's most popular cryptocurrency has hit a temporary pause, hovering around the $37,000 mark. Investors who were previously fueled by the prospect of a spot bitcoin ETF approval now find themselves looking to the Consumer Price Index (CPI) report scheduled for today as the next potential catalyst for market movement.
Economists are eagerly awaiting the release of the October CPI data, which is expected to provide insights into the state of inflation. Analysts anticipate that the monthly headline CPI will have slowed to 0.1% from the 0.4% recorded in September. The year-over-year CPI figure is also predicted to have dipped to 3.3% from September's 3.7%. Meanwhile, the core CPI, which excludes food and energy costs, is projected to have remained unchanged from September, with a monthly increase of 0.3% and a year-over-year rise of 4.1%.
It is important to note that both headline and core CPI readings are well above the U.S. Federal Reserve's target inflation rate of 2%. While the central bank has signaled that it does not require inflation to reach the 2% threshold before considering changes in interest rates, Federal Reserve officials have consistently emphasized their desire to witness sustained progress toward this target.
The relationship between bitcoin and inflation is an intricate one. On one hand, higher interest rates, which can be a response to rising inflation, compete with risk assets like bitcoin for investors' funds. In such a scenario, the allure of a lower interest rate environment may provide a boost to the cryptocurrency. However, the inverse also holds true. Should tomorrow's CPI report reveal a faster-than-expected increase in inflation, cryptocurrency prices could potentially retrace some of their October gains.
Bitcoin enthusiasts are keeping a close eye on this report, as it could have a significant impact on the market's direction in the short term. A lower inflation reading may encourage more investors to seek refuge in bitcoin, viewing it as a hedge against eroding purchasing power. Conversely, a higher-than-anticipated inflation figure might lead to profit-taking in the cryptocurrency market, with investors temporarily moving their assets into more traditional investments, such as bonds or stocks.
The recent surge in bitcoin's price has been driven by a combination of factors, including increased institutional interest, broader acceptance of cryptocurrencies in the mainstream, and concerns about inflation eroding the value of traditional currencies. As a result, the market's reaction to the CPI report will provide valuable insights into how sensitive investors currently are to inflation data and its potential impact on asset allocation.
Market analysts and cryptocurrency experts are divided on their expectations for bitcoin's performance in the wake of the CPI release. Some believe that the cryptocurrency's recent gains are sustainable, given the ongoing macroeconomic uncertainties and the desire for assets with a degree of insulation from traditional financial markets. Others caution that the market may have overextended itself in recent weeks and could be due for a correction, especially if inflation data surprises to the upside.
SEC Poised to Approve Bitcoin ETFs, Expanding Crypto Investment Landscape
In related news, the cryptocurrency market is buzzing with anticipation as the United States Securities and Exchange Commission (SEC) gears up to potentially approve all 12 pending spot Bitcoin exchange-traded fund (ETF) applications by Nov. 17. This decision could mark a significant milestone in the journey of cryptocurrencies toward mainstream acceptance and investment legitimacy.
The SEC's "window" for approval opened on Nov. 9, and it presents a unique opportunity for the regulatory body to give the green light to these much-anticipated Bitcoin ETFs. Among the applicants is Grayscale Investments, seeking the conversion of its Grayscale Bitcoin Trust product into an ETF format.
However, even if the SEC grants approval for these spot Bitcoin ETFs by Nov. 17, investors should be prepared for a potential waiting period of over a month before these products become available for trading. This delay is primarily attributed to the two-step process involved in launching an ETF. For an issuer to bring a Bitcoin ETF to market, it must secure approval from the SEC's Trading and Markets division regarding its 19b-4 filing and obtain the green light from the Corporate Finance division for its S-1 filing or prospectus.
Out of the 12 Bitcoin ETF applications currently under consideration, nine issuers have already submitted revised prospectuses, demonstrating their engagement with the SEC's Corporate Finance division. These efforts signal their commitment to navigating the regulatory landscape effectively and bringing these investment products to market as soon as possible.
The spotlight on the cryptocurrency market has recently expanded beyond Bitcoin, with Ethereum gaining prominence as a leading digital asset. In a significant development, Nasdaq has filed the 19b-4 form with the SEC on behalf of BlackRock, a powerhouse in the asset management industry with approximately $9 trillion in assets under management. BlackRock is seeking approval for the iShares Ethereum Trust, a proposed ETF focused on Ethereum. This move signifies BlackRock's intent to diversify its cryptocurrency investment offerings beyond Bitcoin.
The iShares Ethereum Trust has already taken steps toward its launch, registering the corporate entity iShares Ethereum Trust in Delaware. This initiative underscores the growing interest among traditional financial institutions in expanding their cryptocurrency portfolios and providing investors with diversified exposure to the cryptocurrency market.
BlackRock is not alone in its quest to offer Ethereum-based ETFs. At least five other firms are actively pursuing SEC approval for spot Ether ETFs, including VanEck, ARK, 21Shares, Invesco, Grayscale, and Hashdex. This wave of interest in Ethereum ETFs underscores the broader recognition of Ethereum's significance within the cryptocurrency ecosystem and the potential for it to play a vital role in the future of digital finance.
CoinStats indicated that BTC’s price dropped 1.39% over the past 24 hours. Subsequently, BTC’s price stood at $36,405.44 at press time. Despite the latest drop, BTC’s weekly performance remained at +4.25%.
Price chart for BTC (Source: CoinStats)
The longer-term timeframes for BTC were also well in the green zone. CoinStats data showed that the leading cryptocurrency was up around 36% for the month and approximately 123% over the past 12 months.