SEC Unbelievably Declines to Appeal Grayscale BTC Trust Case - How Long Will the Rally Last?

Last week (10.9-10.15), the cryptocurrency market experienced a correction after the previous rally, but it did not disrupt the overall upward trend.

The total market capitalization showed a downward trend, dropping from 1.09 trillion to a low of 1.04 trillion USD, a decrease of 4.59%. Currently, it has rebounded to 1.05 trillion USD.

The market sentiment index remained below 50 and dropped to 46, indicating a continued state of fear in the market.

Crypto total market capitalization (in yellow) and fear/greed index (in blue) trend from January 1, 2023, to October 15, 2023. Source: MacroMicro.

Accompanied by the overall market decline, the trend of major coins leaned towards bearish. Binance Coin (BNB) and OKEx Coin (OKB) both saw a 2% increase, performing slightly better among the platform coins.

Avalanche (AVAX) went from being the best performer to the worst, with a 4% decline, followed by Polkadot (DOT) continuing its 3% decline.

Performance of major cryptocurrencies from October 9, 2023, to October 15, 2023. Source: MacroMicro.

Bitcoin (BTC) price dropped by 2%, with a 0.3% decrease in its market share, maintaining 50.3%. Ethereum (ETH) price decreased by 1% while its market share remained unchanged at 17.7%.

As of October 16th, the 45-day deadline for a rehearing of the Grayscale Bitcoin Trust (GBTC) case specified by the Federal Appellate Procedure Rules has passed. The U.S. Securities and Exchange Commission (SEC) cannot initiate an appeal, and the court will announce the final authorization result within the next 7 days, officially allowing Grayscale to convert GBTC into an ETF.

Although the U.S. Court of Appeals for the District of Columbia Circuit had already made a ruling on August 29th, granting permission for Grayscale to convert GBTC into a BTC spot ETF, the SEC could continue to appeal the decision, so it did not mean Grayscale had truly won.

At present, SEC did not file an appeal within the 45-day period specified by law, and the previous ruling has now formed the final judgment. This means both parties have accepted the court's earlier decision, and the SEC no longer has the authority to obstruct Grayscale from converting GBTC into a BTC spot ETF.

Following this positive news, not only did BTC and the entire cryptocurrency market see price increases, but NFT trading was also affected. According to on-chain data aggregator CryptoSlam, NFT trading volume increased by 15% in the 24 hours after the SEC dropped its appeal on the Grayscale BTC Trust case, and the number of active investors grew by approximately 6%.

Previously mentioned, the victory of Grayscale over the SEC holds two important implications: giving cryptocurrency investors a sense of relief and facilitating other institutions' applications for BTC spot ETFs. So, what positive effects does this have on BTC's development?

First, GBTC is a closed-end fund with high entry barriers and poor liquidity. Converting GBTC into a BTC spot ETF means transitioning to an open-end fund, allowing ordinary retail investors to trade directly on exchanges, significantly lowering participation thresholds and increasing liquidity.

Second, GBTC often experiences premiums or discounts, meaning its net asset value differs from market prices. ETFs are closer to market prices, avoiding this issue and making trading more fair and transparent.

Third, as a closed-end fund, GBTC has various restrictions and regulatory requirements that hinder institutional investors' participation. In contrast, BTC spot ETFs align more with traditional financial market regulatory standards and requirements, making it convenient for institutional investors to enter the market.

In summary, allowing Grayscale to convert GBTC into a BTC spot ETF helps lower investment barriers and facilitate various types of investors, which is beneficial for the future development of BTC.

On October 9th, BTC opened at $27,900 and continued to decline, forming a bearish pattern with three consecutive red candles. On October 11th and 12th, BTC dropped to $26,500 twice but ended up with long lower shadows, effectively stopping further declines.

After two days of sideways consolidation, BTC initiated another rally today, with a large bullish candle approaching the previous high of $28,000.

Bitcoin daily price chart, Source: TradingView.

$28,000 is not only the previous high but also the midpoint of the range between $25,000 and $31,000, serving as a dual resistance level for BTC prices. However, from a weekly perspective, BTC's price movement has formed a bullish engulfing pattern, indicating a renewed dominance by the bulls.

Bitcoin weekly price trend forecast chart, Source: TradingView.

Furthermore, from the news side, the victory of the United States SEC may trigger other institutions to apply for the good of BTC spot ETF, and the escalation of the Palestinian-Israeli conflict is conducive to stimulate investors to form hedge demand for BTC, so continue to maintain the previous view that BTC is expected to attack again, the third time to touch the top of the box $31,000.