The latest moves in crypto markets, in context

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Market Moves

A day after the release of hawkish Fed minutes, the battered crypto market is reassessing prospects of U.S. regulators approving a spot-based bitcoin exchange-traded fund (ETF).

A spot-based ETF would allow investors to take exposure to bitcoin through a regulated product without having to own the actual cryptocurrency and is expected to boost institutional participation and bring trillions of dollars into the crypto market. The U.S. Securities and Exchange Commission (SEC) has time and again rejected spot-based bitcoin ETFs, citing a lack of market surveillance and risk of manipulation.

Some experts, however, are again hopeful, thanks to the SEC's decision to greenlight Teucrium's futures-based ETF filed under the Securities Act of 1933.

The 1933 act governing spot-based ETFs requires filing form 19B-4, detailing how the underlying asset is manipulation-resistant. Applications for the several futures-based ETFs approved since October 2021 were filed under the Investment company Act of 1940, which governs futures ETFs and doesn't require submission of Form 19B-4. Last year, SEC Chairman Gary Gensler had favored futures-based funds over a spot bitcoin ETF, clearly mentioning the 1940 act as appropriate for approving bitcoin futures-based instruments.

"The SEC approves Teucrium Bitcoin Futures ETF filed in 33Act structure. All previous BTC futures ETFs were in 40Act structure," Bloomberg's ETF Analyst Henry Jim tweeted. "Bottom line: this increases chances of a 'spot' bitcoin ETFs being approved as it would only be able to use the 33Act structure."

In a tweet thread, Grayscale's CEO Michael Sonnenshein said that "if the SEC is comfortable with a bitcoin futures ETF, they must also be comfortable with a spot Bitcoin ETF. And they can no longer justifiably cite the '40 Act as being the differentiating factor."

Sonnenshein argued that the SEC, while approving Teucrium's application under the '33 Act, defined the underlying market as being restricted to the Chicago Mercantile Exchange (CME)-listed bitcoin futures. However, the CME futures are influenced by the unregulated spot market. So, the regulator can no longer deny spot-based ETFs, stating they are exposed to abuse. Grayscale's parent company Digital Currency Group is also the owner of CoinDesk, which is run as an independent subsidiary with an editorial firewall. Grayscale has applied to convert its Bitcoin Trust into a spot-based ETF.

However, some observers are skeptical, as overseeing the spot market, still dominated by whales or large investors on offshore exchanges, remains a challenge.

"The SEC will continue to reject a spot ETF as their main reason is manipulation on unregulated spot crypto exchange that they cannot oversee," Laurent Kssis, managing director and head of Europe at crypto exchange-traded fund firm Hashdex, told CoinDesk in a Telegram chat. Kssis has long-held a belief that regulators would stay away from spot-based products while the cash market is unregulated.

Grayscale's CEO Michael Sonnennshein's Twitter thread.

"The CME is regulated and so they fulfill their obligations to the market and objectives to oversee regulated financial markets irrespective of underlying constituent contract," Kssis added.

Jad Comair, founder and CIO of French ETF provider Melanion Capital, said, "the exchanges where bitcoin trades are less regulated than traditional financial exchanges, and this remains will remain an issue for regulators."

However, regulation may be coming soon and that could keep hopes of a spot-based ETF alive, perhaps helping the market absorb shocks from Fed's aggressive monetary policy tightening.

"With Biden’s executive order, the Chancellor of the Exchequer, and Europe’s MiCA announcements and proposals, everything indicates that regulation will improve to a certain point where regulators will be confident approving crypto’s eligibility in retail products, like ETFs," Comair noted. "At Melanion, we share Kevin O’Leary’s vision yesterday at the Bitcoin Conference, that bitcoin is now a sector. Therefore, we have solved the Bitcoin ETF quest by qualifying and weighting Equities that represent most of the bitcoin sector.

When you imagine the future, what do you see?

At Grayscale, we believe the future of finance is represented by the digital economy, and cryptocurrencies are at the forefront of this evolution.

Asthe world’s largest digital currency asset manager, Grayscale is exclusively dedicated to creating products with potential for growth in the digital economy, offering investors an opportunity to gain early exposure to the latest innovations – and the ease of doing so directly through their IRAs and brokerage accounts.

Explore the future with Grayscale - learn more about our family of investment products on our website: grayscale.com/products

Crypto Prices

Bitcoin (BTC)

See the latest price here

Ether (ETH)

See the latest price here

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers:

Biggest Losers:

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

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Latest Headlines

Bitcoin's Bull Cross

Bitcoin's 50-day simple moving average (SMA) has moved above the 100-day MA, confirming what is known as a bull cross in technical analysis.

The cryptocurrency saw extended gains following similar bull crosses in mid-August 2021 and early October 2020.

Moving averages are lagging indicators and are known to trap trend-following traders on the wrong side of the market.

Bitcoin's daily chart showing a bull cross. (TradingView, CoinDesk.)

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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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