What happened this week in the world of blockchain and cryptocurrencies? The most relevant local and international events as well as appealing background reports in a concise and compact weekly review.
Selected articles of the week:
For over a decade, providers of cryptocurrency products have been seeking approval for an exchange-traded Bitcoin fund (ETF). In October 2021, a major milestone was reached with the introduction of a futures-based ETF. However, the SEC continued to reject ETFs based on the spot price of Bitcoin. Two years later, following the entry of some of the world’s largest asset managers, the tide has turned. The legal victory of the crypto conglomerate Grayscale against the Securities and Exchange Commission (SEC) gave the applicants a decisive tailwind in August. A three-member appeals panel in Washington D.C. ruled unanimously that the categorical rejection of spot-based Bitcoin ETFs was arbitrary. The SEC is therefore likely to give the green light next week.
Celsius Network developed into one of the leading crypto lending platforms before the series of crashes in 2022. Customers could open interest-bearing accounts with cryptocurrencies, and Celsius offered them an attractive double-digit percentage return. Behind the scenes, the platform used the deposited assets both to provide liquidity on decentralized protocols and to lend to hedge funds and market makers. However, after the numerous defaults, Celsius lacked the necessary funds for customer withdrawals. In July 2022, Celsius filed for bankruptcy. Since then, the insolvency administrator has been working to liquidate the remaining crypto holdings.
The lack of clarity in the regulatory approach to the crypto industry in the United States has caused problems for many companies. This has been the main reason why several companies have pulled out of the US market over the past year. Regulators at both the federal and state level are taking different approaches, causing confusion and inhibiting the growth of the industry. In addition, recent SEC fines, lawsuits and enforcement actions highlight the hurdles the United States faces in accepting cryptocurrencies. An overview of the so far successful Swiss approach.
Bitcoin has been on a steady upward trend since the beginning of 2023. In the last two months, this trend has accelerated due to the anticipation of the potential approval of the first spot Bitcoin ETF in the United States. The deadline for a decision from the US Securities and Exchange Commission (SEC) is next Wednesday. However, in line with high expectations, many leveraged traders have entered the market. This can be seen by looking at the historical premiums for derivative contracts (“funding rates”) on centralized exchanges. A few days ago, the funding rate reached a local high of 43.8% on an annualized basis. As is often the case in such overbought phases, there was eventually a correction that took some leveraged positions out of the market. Around USD 800 million in long positions have been liquidated since the middle of the week.
In addition: 2023 proved to be a dynamic year, characterized above all by key moments that accelerated innovation and adoption in the cryptocurrency industry. While 2022 was often referred to as the year of disruption, 2023 proved to be the year of consolidation and resilience. Grayscale’s regulatory victory paved the way for a spot ETF, Bitcoin found new use cases through ordinals, Solana saw a resurgence and interoperability achieved further milestones.