Bitcoin gets a sliver of optimism to cap an otherwise dismal week for crypto

Published Sat, Jun 17 20237:47 AM EDT

Bitcoin rallied to end the week following a surprise move by BlackRock that provided a much-needed confidence boost for the crypto industry, which has been crushed by the weight of SEC actions for several weeks now. Bitcoin ended this week slightly negative, by 0.21%, at $26,355.04. Coin Metrics measures a week in crypto, which trades 24 hours a day, from the 4:00 p.m. ET stock market close one Friday to the next. This was bitcoin's second down week in a row. Traders were upbeat after BlackRock , the largest asset manager in the world, filed for a spot bitcoin ETF after the bell on Thursday. Price reaction was initially muted as many traders wondered why it would make that move now when just one week before, Coinbase , the crypto custodian in the proposed bitcoin ETF by BlackRock, was sued by the SEC for violating securities laws. Optimism took hold on Friday, however. "A lot of what drives crypto prices are just expectations for what this can be used for," said Gustavo Schwenkler, associate professor at the Leavey School of Business at Santa Clara University. "Right now, it's still not quite clear exactly what kind of use cases we're going to see crypto take on in the future. Allowing institutional money to flow into crypto would introduce a new kind of use for crypto that is right now not available, and I can see that uplifting prices." "If this gets approved, it changes the perception of what crypto is good for, and that could really impact how bitcoin and other cryptocurrencies are valued," he added. A moment of relief Bitcoin climbed about 4% Friday, but the rest of the week wasn't as sunny. Price action was tepid to start the week and on Wednesday bitcoin briefly fell to a March low. "The FOMO is completely out of the market," said Mark Connors, head of research at 3iQ. "So even though the tourists are gone and we've seen some bitcoin dominance … there are a lot of headwinds." "We're revisiting recession-type concerns," he added. "You see it in the macroeconomic data, in the rates data. … It's a doubting Thomas market for the next buyer of bitcoin right now. You're down to the people who are core holders – you see it in wallet traffic, which is very low on the large holders, and you're seeing on the exchanges: that next layer isn't there because the volumes aren't there." Bitcoin fell below the $25,000 mark for the first time since March after the Federal Reserve's June meeting. The central bank skipped a June rate hike but Fed Chair Jay Powell said there could be two more increases this year. SEC lawsuits against Coinbase and Binance in the previous week continued to weigh on investors, too. "Bitcoin and digital assets have had one of the best returns of any asset class in 2023 and the flows are minimal to down," Connors said. "That divergence, where returns are not attracting dollars, that's as strong a sentiment indicator as you get, and that's one reason why we're in the bottom quartile in sentiment in this asset class." Miner profitability Bitcoin's recent declines may not be entirely on macro and regulatory headwinds, said Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank. The recent movement of bitcoin from miner wallets to exchange wallets spiked at the end of this week, and the amount of bitcoin sent to exchanges is at a level not seen since October 2021, according to Glassnode. "It indicates that miners' profitability from bitcoin's block reward may be declining due to the decline in the coin's price and rising mining difficulty," Hasegawa said. "They are slowly offloading their bitcoin holdings, thereby limiting bitcoin's upward potential in the process."