SEC wants to designate Ether as a security, Bitcoin bounces back
SEC wants to designate Ether as a security, Bitcoin bounces back

Key findings

  • The Securities and Exchange Commission (SEC) is reportedly building a case to classify Ether as a security.
  • Bitcoin rebounded on Monday, passing $70,000 for the first time in five days.
  • Last Tuesday, Bitcoin suffered its biggest one-day drop in price since the collapse of crypto exchange FTX.
  • BlackRock is launching a tokenized fund on the Ethereum network that is backed by traditional assets like US Treasurys.
  • After seeing spot bitcoin exchange-traded fund (ETF) inflows turn into outflows last week, analysts are now tracking the viability of spot ether ETF approval through the end of May.

What happened in the crypto markets last week?

The crypto market shook off some of last week’s jitters, crawling back into the green on Monday. Bitcoin bounced back above $70,000, and gains were seen in crypto tokens and crypto-related stocks.

After hitting a series of all-time highs in the previous weeks, inflows into spot bitcoin exchange-traded funds (ETFs) eased and the price of bitcoin posted its biggest one-day drop in more than two years. Meanwhile, Ether has found itself in the spotlight following reports that the Securities and Exchange Commission (SEC) wants to classify it as a security.

Despite this negative news, global investment company BlackRock unveiled a new tokenized fund on the Ethereum network.

The SEC is reportedly targeting Ethereum

The SEC is conducting an investigation to classify Ether (ETH), the native cryptocurrency of the Ethereum network, as a security. Wealth reported. Companies that received subpoenas related to that investigation said the SEC wanted documents and financial records about their dealings with the Ethereum Foundation, a Swiss-based nonprofit that oversees the management and development of the blockchain.

The investigation appears to have gained momentum following the completion of Ethereum’s transition to a proof-of-stake model in September 2022. The SEC perceives this change in the network as an investment contract that could potentially qualify ether as a security within the agency’s purview.

It should be noted that this development could point to derailing the crypto industry’s hopes for SEC approval of spot ether ETFs in the near future. However, a number of spot ether ETF candidates have indicated they would be willing to accept the crypto asset’s designation as a security, according to a report in Forbes.

Bitcoin experiences biggest one-day decline since FTX collapse

Bitcoin (BTC) is back above $70,000 on Monday morning after big drops last week. The largest cryptocurrency fell below $62,000 by March 20 after optimism surrounding spot bitcoin ETFs drove the price to multiple highs, most recently above $73,000 less than a week earlier.

Last week’s sharp drop was particularly notable as it was more than 8% and the biggest one-day drop for the crypto asset since November 2022 in the midst of the collapse of the now-defunct crypto exchange FTX.

“It appears that volatile price activity was more concentrated during US hours,” Kaiko Research said on Monday, adding that “the current spike in volatility follows a period of unusually low volume and volatility, causing recent swings to feel more pronounced’.

Net outflows for spot bitcoin ETFs were at historic highs during the sharp price decline, according to BitMEX Research. Outflows peaked on Tuesday last week at roughly $326 million, and the next day’s numbers weren’t much better, with investors withdrawing about $261 million.

According to Bloomberg analyst James Seyfarth, last week’s outflows were likely due to a bankruptcy case involving crypto lender Genesis. Just the previous week, spot bitcoin ETF inflows hit all-time highs.

BlackRock Launches Ethereum Tokenized Fund

BlackRock (BLK) unveiled its tokenized asset fund built on the Ethereum blockchain. The BlackRock USD Institutional Digital Liquidity Fund represented by the BUIDL token is fully collateralized by cash, US Treasury bills and repurchase agreements.

Token holders will receive daily income payouts facilitated by the Ethereum network. Other key participants in the project include Securitize, BNY Mellon, Anchorage Digital Bank NA, BitGo, Coinbase Global (COIN) and Fireblocks. BlackRock also made an undisclosed investment in transfer agent Securitize.

BlackRock also has a spot ether ETF application under review by the SEC, and CEO Larry Fink previously discussed the tokenization promise in a July 2023 interview with Fox Business, shortly after the investment firm’s spot bitcoin ETF application was filed. an intermediary.

What to expect in the markets this week

Although Bitcoin has recovered somewhat from last week’s lows, analysts are waiting to see if inflows into the spot Bitcoin ETF can turn positive again. In particular, BlackRock’s iShares Bitcoin Trust (IBIT) is closing the gap with Grayscale Bitcoin Trust (GBTC) in terms of total assets under management (AUM) and may soon take over as the largest spot bitcoin ETF.

As is often the case, a rising Bitcoin leads other cryptocurrencies and crypto-related stocks to rise. Ether traded up about 7% on Monday, while Solana (SOL) gained almost 10%. Shares of Microstrategy Inc. (MSTR) rose roughly 20%, while Coinbase shares rose more than 8% in afternoon trading on Monday.

Elsewhere, falling odds for the spot ether ETF through the end of May, given by both analysts and forecast markets, are on the minds of those who want to see Bitcoin’s bull run spread to the rest of crypto the market. Additionally, it’s unclear whether betting would be allowed in a potential spot ETF, as indicated in a recently revised application for one filed by Fidelity.

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