Last week, Bitcoin (BTC) closed at around $37,000, up 5.9% from the previous week’s closing price of $35,000. This week saw strong price action as we witnessed BTC fluctuating with consecutive daily price increases from Monday to Friday. The highest trading price was observed on Thursday, reaching nearly $38,000. After this peak, prices fell slightly, stabilizing around $37,000 from Friday into the weekend.
BTC dominance, which measures Bitcoin’s market capitalization relative to the overall digital asset market, has declined for the second week in a row to about 52.3%. This is a 0.7% decrease from the previous week, highlighting the continued dispersion of liquidity among speculative assets. This characterizes the phase when investors express confidence and trust in the market and engage in riskier trades.
Trading activity continued to surge, with cumulative daily trading volume on centralized exchanges (calculated by a 7-day moving average) reaching $31.4 billion. The figure, the highest since late March, reaffirms that the recent uptick has been driven by strong trading activity.
What is noteworthy is the significant involvement of traditional finance in the recent upward trend. For the first time, BTC open interest on the Chicago Mercantile Exchange (CME) exceeded 100,000 contracts, surpassing Binance to become the leader in BTC open interest. The strong presence of these traditional financial investors is also evident in the discount rate for Grayscale Bitcoin Trust (GBTC), which is currently at 10.3%, the lowest since August 2021.
The increase in traditional financial activity related to BTC highlights the confidence market investors currently have regarding the approval of a future BTC spot ETF. It is important to note that the first final deadline for SEC decisions regarding the 21Shares BTC spot filing is scheduled for January 10, 2024. In most cases, the SEC will make a final decision (approval or rejection) to approve or reject all filings before this date to avoid giving any issuer a first-mover advantage. Additionally, filings for digital asset spot ETFs continue to occur, with recent news that Blackrock has filed for an ETH Spot ETF following Grayscale’s decision to convert the Ethereum Grayscale Trust (ETHE) into an ETH Spot ETF. A few weeks ago.
In particular, the surge in price and trading activity through traditional financial channels, the continued decline in GBTC discounts, and the notable net inflows observed in ETPs based on digital assets suggest that market investors are betting on approval. Securing approval from the SEC could lead to significant investments from traditional finance, bringing an influx of new investors that could strengthen and elevate digital assets to a more recognized asset class. Conversely, given the prevailing expectations favoring approval and the subsequent positioning of market participants to be highly influenced by these expectations, rejection could probably trigger a short-term recession.