Crypto prices rising and sentiment flipping but liquidity & macro picture are ominous

Key Takeaways

• Crypto prices are rising sharply, with Bitcoin up 20% in the last three weeks
• The filing of a number of high-profile Bitcoin ETFs has pushed optimism in the market
• Under the hood, liquidity remains low and some worrisome trends emerge, however
• The regulatory woes are still present, with Coinbase and Binance facing a murky future
• The macro picture also remains uncertain, with the prospect of a lagged impact via tightening monetary policy looming large

It wouldn’t be like crypto markets to get overly excited. In the past couple of weeks, positivity has returned to the space, led by the seminal filings for a Bitcoin spot ETF by two of the world’s biggest asset managers, Blackrock and Fidelity. 

Additionally, Fidelity were among a cohort of large trad-fi operators, including Schwab and Citadel, to back the new exchange EDX, which offers trading for Bitcoin, Ether, Litecoin and Bitcoin Cash. 

Bitcoin is up 20% in the last three weeks, breaching past the $30,000 mark, while Ether is up 16% in the same timeframe, approaching the $2,000 mark once more. A glance at the Fear and Greed index, an interesting metric which gauges overall sentiment in the space, shows it is markedly in the “greed” sector with a score of 61 (0 represents extreme fear, 100 represents extreme greed). 

And yet, a look under the hood betrays some concern. Firstly, if the filing of the ETFs is the reason for the recent ramp, as it appears to be, is a 20% jump justified? The SEC has declared the recent filings as “inadequate”, according to the WSJ, informing the Nasdaq and CBOE (who filed the paperwork on behalf of the asset managers) that there is not enough detail with respect to “surveillance-sharing agreements”. The SEC had previously said that sponsors of a Bitcoin trust are required to enter into a surveillance-sharing agreement with a regulated market of significant size.

While the applications can be updated and refiled (and the CBOE did indeed refile theirs since, with Nasdaq likely soon to follow) the development hints at how difficult it has been to get the much-coveted spot ETF over the line. There is no guarantee that these are approved, despite the big names involved – the SEC even rejected an application from Fidelity in the past, turning it away in January 2022. 

In truth, it feels inevitable that Bitcoin spot ETFs will…