The setup for the next bitcoin bull run has become even clearer wiafter last week’s landmark ruling in Grayscale’s suit against the Securities and Exchange Commission delivered what Bernstein calls a “game changer” for asset managers. This time, however, it will be led by institutions rather than retail investors, which helps explain why crypto prices remain stagnant despite having several positive catalysts in recent weeks. “The strong showing in the courts (Ripple and Grayscale in two months), improved ETF chances and the progressive institutional interest are positioning crypto for an unprecedented institution capital led cycle, unlike the retail led crypto cycles of the past,” Bernstein’s Gautam Chhugani said in a note Monday. “This is a cycle slower to take off, but is being laid on much stronger fundamental grounds of regulatory clarity and more strategic long-term players entering the space.” Last week, bitcoin rallied more than 7% after the U.S. Court of Appeals for the D.C. Circuit ruled that the SEC was wrong to deny crypto investment giant Grayscale permission to convert its popular bitcoin trust, known by its ticker GBTC , into an ETF. The rally failed to hold, however, and by the time the SEC had delayed its decisions on the first spot bitcoin ETFs two days later, bitcoin had given up all of its gains from the news. BTC.CM= 5D mountain Bitcoin is back to hovering under the $26,000 level. “The existing crypto market remains a low liquidity market, with limited new capital entering the space. As a result, traders position around events and sell the good news,” Chhugani wrote. “The lack of follow through in the market should not be interpreted as lack of progress towards a new capitalization cycle.” Investors remain optimistic about the recent developments and what they could mean for the crypto market over the long term, however. The ruling is just one step forward, but could open the door to the approval of the first bitcoin ETF in the U.S., ushering in a wave of new demand for the digital asset. However, it’s unlikely to free the market from the regulatory uncertainty that has pressured it all year. Specifically, the details of the ruling show that the SEC would have to find a new reason to deny these applications again. The agency for years has maintained that various attempts at a bitcoin ETF didn’t satisfy concerns about fraud and manipulation in the market. The ruling shot that down, noting that “bitcoin futures prices are ultimately based on spot market prices.” Several bitcoin futures ETFs have been green-lit to launch. “Thus, we believe, the crypto industry will get its first Bitcoin ETF between mid October and mid March 2024 (the scheduled review dates),” Chhugani said, adding that it probably won’t stop there and could open up a “massive commercial opportunity” for asset managers “to generate fees (at healthy rates 50-75 bps) for a growing asset class.” “The industry push for Ethereum spot ETF follows immediately after, given ETH also has a similar market structure of a traded CME futures market ( > 2 years) and a spot market,” he added. “In fact, the asset management industry would push beyond BTC, ETH into areas as such a top blockchains (Solana, Polygon etc) and even extend into segments such as leading DeFi assets.” —CNBC’s Michael Bloom contributed reporting.
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