There’s never a dull moment on the blockchain. Here’s what you need to know this week:

Bitcoin

$95,009.09

陋

0.61%

Ethereum

$3,392.54

陋

1.34%

Tether

$1.00



0.00%

XRP

$2.18

陋

0.60%

Solana

$195.68

陋

5.17%

Dogecoin

$0.33

陋

2.97%

See the latest prices

MARKET UPDATE

Bitcoin prices slipped again this week as SEC punts on ETF decisions

Last week, bitcoin rallied to nearly $28,200 after a federal court sided with asset manager Grayscale — which had sued the SEC over denying the firm’s request to convert its Grayscale Bitcoin Trust into a “spot” BTC exchange-traded product. The ruling had many market watchers predicting that the SEC would soon approve spot BTC ETF applications from a range of Wall Street giants including BlackRock and VanEck. But when the agency punted on those decisions late last week, prices sank around 7% to roughly $25,500. 

Let’s dig into what it all means. 

Why is a spot BTC ETF such a big deal?

ETFs are a hugely popular asset class, with more than $10 trillion under management worldwide. Spot BTC ETFs (which would hold BTC and sell shares to customers) are seen as a potentially powerful way to increase mainstream adoption of crypto — because they can be bought or sold via conventional brokerages, they are widely held by everyone from individuals saving for retirement to hedge funds. 

“Around half of the nation’s financial advisors in the United States personally own bitcoin, but only 12% are recommending bitcoin to their clients,” the founder of the Digital Assets Council of Financial Professionals told Yahoo Finance. “And the primary reason that advisors are not recommending bitcoin is because there isn’t an ETF.”

Why did markets spike and then fall last week?

You may recall that markets rallied in June after news broke about a wave of spot BTC ETF applications from some of Wall Street’s biggest names — crypto prices saw a similar bounce after last week’s Grayscale ruling lifted hopes for approvals of those ETFs.

But late last week, just as investors began to believe SEC approval was more likely, the agency delayed making a decision on six applications (including from BlackRock, VanEck, and WisdomTree) until October. Following the SEC’s punt, prices dipped again.

How did institutional investors react?

The conflicting signals over ETF approval appeared to split sentiment among institutional investors. A pair of stats from CoinShare’s latest report illustrate this disparity: total market activity for digital-asset investment products spiked 90% above the year-to-date average to $2.8 billion, but all that action added up to a net outflow of just $11.2 million — indicating that an almost identical amount of money flowed in as flowed out. 

As CoinShares’ head of research told Decrypt, “Some believe the delay from the SEC is bad news and [are] selling, while others see the price weakness as a buying opportunity.” 

What comes next in the BTC spot ETF process?

The next big date to watch is Oct. 16, when the SEC is required to make a decision to approve, deny, or delay Bitwise’s application. But some analysts note that the SEC often takes around the maximum allowed time — 240 total days — before it issues final decisions on ETF applications. The clock runs out on the first pending application in January.

Many observers remain bullish about the odds of a spot BTC ETF gaining approval in the relatively near future. Former SEC chair Jay Clayton said that approval is “inevitable” given the agency’s loss in court to Grayscale. Meanwhile, Bloomberg analysts peg the chances of an ETF approval this year at 75%. And in related ETF news, ARK Invest filed for the U.S.’s first-ever spot ETH ETF on Wednesday.

The bottom line… 

At least some analysts believe that the approval of one or more spot bitcoin ETFs could be a key catalyst in thawing out the “crypto winter” markets have been mired in since 2022. According to a recent report from private-wealth firm Bernstein, a significant amount of institutional capital is poised to pour into crypto as courts side with the industry and regulatory clarity begins to emerge: ​​“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.”

FUTURE STATE

Why everyday traders should understand futures contracts

There are lots of ways to trade crypto. The simplest version is known as spot trading — where you buy cryptocurrency via an exchange like Coinbase. But there are also more complex trades professional investors make, often involving leverage (borrowed capital) and derivatives (contracts that derive their value from an underlying asset or commodity, allowing investors to gain exposure to an underlying asset without purchasing it directly). 

You may have seen futures in the news recently — as in Grayscale’s recent legal victory over the SEC, which hinged on the fact that bitcoin prices and bitcoin futures prices are highly correlated. Because futures can be hard to understand, we put together this explainer — which is illustrative and neither financial advice nor an investment strategy recommendation. Here’s what you need to know.

What is a futures contract?

A futures contract is an agreement to buy or sell an asset at a future date and price. These contracts are traded on a futures exchange and accessed through a regulated broker. You can also buy shares in exchange traded funds (or ETFs) that hold bitcoin futures contracts, and the SEC is expected to approve similar products for ether. 

How can futures market data inform spot trading?

You don’t need to be a highly technical futures trader to understand the insights that futures markets offer: Even if you’re just interested in making spot crypto trades, crypto futures markets can help you see what other investors think will happen in the future. (If you want more detailed examples of how futures trades work, we have you covered.)

For instance, if the price of a bitcoin futures contract is increasing, this could suggest that there is strong demand for bitcoin and that prices in the spot market have the potential to rise as well. Or the opposite: just before mid-August’s selloff, about two-thirds of leveraged funds making BTC futures trades were betting on lower prices to come.

Another way to gain insight into market sentiment is to look at the difference between the spot price and the futures price — a metric known as a cryptocurrency’s “basis.” As an example, imagine that BTC is trading at $30,000 on the spot market but there’s a Nano Bitcoin futures contract timed to the following month with a price of $31,000. The higher future price could indicate that the market sentiment is bullish. (While these are useful indicators of market sentiment, they should be evaluated in conjunction with many other factors such as trading volume, market depth, and news events.)

Does Coinbase offer futures?

Currently, advanced and institutional traders can access derivatives through Coinbase Derivatives Exchange via several third-party leading brokers and clearing firms. In August, Coinbase Financial Markets, Inc. secured approval to offer federally regulated crypto futures to eligible U.S. customers. (Learn more.)

What should I keep in mind while using futures data for research?

History doesn’t repeat itself, so studying market data patterns won’t necessarily help you make accurate predictions, especially in volatile markets. Executing a successful short-term trade strategy is notoriously difficult and risky — so only invest what you can afford. And remember, a certified financial advisor can help you develop a strategy and understand associated risks.

Disclaimer: Trading in futures involves substantial risks. You should only trade in financial products that you are familiar with and understand the associated risks, and after carefully considering whether such trading is suitable in light of your investment experience, financial position, and investment objectives. Leverage in futures trading can work for you or against you. The risk of loss using leverage can exceed your initial investment amount.

Coinbase Financial Markets is a member of NFA and is subject to NFA's regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.

NUMBERS TO KNOW

5.6 million

Record number of ETH options contracts (worth around $9 billion) that changed hands last month via crypto-derivatives exchange giant Deribit. Per CoinDesk, “Options are derivative contracts that give the purchaser the right to buy or sell the underlying asset at a preset price at a later date. A call option offers the right to buy and a put gives the right to sell.”

$1.65 million

Estimated value of the NFT collection “Pixel Pioneer,” which is made up of previously unseen artworks created by Keith Haring on an Amiga computer he received as a gift from psychedelic pioneer Timothy Leary. The collection goes on sale via a Christie’s auction that begins on Sept. 12.

15,000

Number of financial institutions (across about 25 currencies) participating in Visa’s USDC settlement program, which uses the Solana blockchain. “By leveraging stablecoins like USDC and global blockchain networks like Solana and Ethereum, we're helping to improve the speed of cross-border settlement,” said Visa’s head of crypto in a statement. 

22

Number of people worldwide who have crypto holdings worth more than $1 billion, according to investment firm Henley & Partners’ new Crypto Wealth Report.

10

Number of survey questions University of Cincinnati researchers are using to develop a new Crypto Literacy Scale. “We want to create a rigorous tool that gives researchers, policymakers, and the industry a baseline of crypto literacy,” economics professor Michael Jones told Decrypt.

TOKEN TRIVIA

What is the smallest unit of a Bitcoin?

Find the answer below.

Trivia Answer