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Bitcoin’s trading volume hit its lowest level in almost five years this month as investors keep waiting for reasons to jump back into the market.
An analysis of CryptoQuant data from both spot and derivatives exchanges shows the total volume of bitcoin held on all exchanges fell earlier this month to its lowest level since 2018 and has struggled to rebound.
As of Aug. 26, bitcoin
trading volume on all exchanges sat at 129,307 BTC, according to CryptoQuant. Earlier in the month, on Aug. 12, it fell to 112,317 BTC, its lowest level since Nov. 10, 2018. It’s now off the March high of 3.5 million BTC by about 94%.
“Trading volumes decrease in bear markets as retail investors leave,” Julio Moreno, head of research at CryptoQuant, told CNBC. “This happened during 2022 on most exchanges. As we progress further into a bull market, the trading volume may continue to pick up.”
The price of bitcoin is still up 57% for the year and hovering at about $26,100, according to Coin Metrics.
It’s been an excruciatingly quiet summer for bitcoin traders, but seasonality only accounts for so much of it. The U.S. regulatory crackdown on crypto combined with the end of the banking crisis in May (which accounted for much of its year-to-date gains) drove market makers and traders away – and they haven’t had a reason to return.
Even after bitcoin’s violent sell-off on Aug. 17 — the biggest one-day sell-off since the height of the FTX fallout in November — the market quickly became quiet again. Data shows long-term investors haven’t been easily shaken by the recent weakness.
“Overall, [the] market remained dull waiting for a new catalyst and the overall market liquidity remained scant,” Bernstein analyst Gautam Chhugani said in a note Monday of the last week in crypto trading. “This market is not necessarily bearish, but the participants remain disinterested to trade, as the market waits for catalysts” – specifically, in the form of decisions on any of the spot bitcoin ETF applications in line at the Securities and Exchange Commission.
Chhugani said that whatever ends up bringing some movement back to the market, investors’ real opportunity “lies in staying the course into the new market cycle,” which tends to coincide with the Bitcoin halving. The next one is expected to take place in spring of 2024. Cantor Fitzgerald echoed that emphasis on the long game.
“Although near-term catalysts may take many forms, we continue to believe in the long-term story of ongoing crypto adoption and bitcoin’s staying power as an alternative asset and store of value,” Cantor Fitzgerald analyst Josh Siegler said in a note Monday.
—CNBC’s Michael Bloom contributed reporting.
Correction: On Aug. 12, bitcoin trading volume fell to 112,317 BTC, its lowest level since Nov. 10, 2018. An earlier version of the story misstated the low and when the prior low occurred.
The price of bitcoin surged Tuesday after the U.S. Court of Appeals for the DC Circuit ruled that the Securities and Exchange Commission was wrong to deny crypto investment giant Grayscale permission to convert its popular bitcoin trust into an ETF.
Bitcoin jumped about 7% following the ruling to $27,911.67, according to Coin Metrics. The move lifted cryptocurrencies broadly as well as crypto equities higher.
Grayscale’s lawsuit against the SEC has been closely watched by investors and other industry participants as a key catalyst that would shake up a market marred by low volatility and liquidity. Earlier this month bitcoin trading volatility fell to its lowest level in more than four years as investors had been waiting on the sidelines for more regulatory clarity on crypto activity – whether through new legislation out of Congress or through the ability to launch a spot bitcoin ETF.
Several bitcoin futures ETFs have already been approved in the U.S.
“The denial of Grayscale’s proposal was arbitrary and capricious … The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said in the ruling. “In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful. We therefore grant Grayscale’s petition for review and vacate the Commission’s order.”
Tuesday’s ruling may increase the chances that the SEC will approve other bitcoin ETF applications – including that of BlackRock, whose filing in late June drove one of bitcoin’s big rallies this year, as well as Fidelity, WisdomTree, VanEck and Invesco and others. A U.S. bitcoin ETF would provide a way to get exposure to bitcoin without having to hold it, which would invite retail and institutional investors as well as wealth managers into the market.
A spokesperson for the SEC said it’s “reviewing the court’s decision to determine next steps.”
“Today’s decision reaffirms that a bitcoin ETF in the U.S. is a matter of when, not if,” said Steve Kurz, Global Head of Asset Management at Galaxy, which filed with Invesco for its bitcoin ETF. “In order for digital assets to continue to flourish, they must be accessible to all investors. We believe that the ETF structure can enable greater access to and transparency across cryptocurrency investing, and truly help further democratize the asset class.”
The ruling also comes as a relief to many crypto market participants who have been frustrated by the SEC, particularly under Chair Gary Gensler, and its insistence on regulating by enforcement. The crypto industry has long sought out clarity in rules businesses can play by to establish and build long-lasting, compliant companies. The U.S. regulatory crackdown on crypto in 2023 — which includes and SEC enforcements and a lawsuit against the biggest U.S. crypto exchange — Coinbase
, has been a dark cloud over the market.
Grayscale initiated its lawsuit against the SEC in June 2022 after the agency rejected its application to turn its bitcoin trust, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.
The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about market manipulation and investor protections.
The Grayscale Bitcoin Trust
itself jumped 16%.
—CNBC’s Jesse Pound contributed reporting.
KEY POINTS
The U.S. Court of Appeals for the D.C. Circuit has paved the way for bitcoin exchange-traded funds.
On Tuesday, the court sided with Grayscale in a lawsuit against the Securities and Exchange Commission which had denied the company’s application to convert the Grayscale Bitcoin Trust to an ETF. The decision could impact other companies that want to create bitcoin ETFs, like BlackRock
and Fidelity.
A spot bitcoin ETF would be traded through a traditional stock exchange, although the bitcoin would be held by a brokerage, and would allow investors to gain exposure to the world’s biggest cryptocurrency without having to own the coin themselves. Many crypto bulls believe that approval of a spot bitcoin ETF will lead to more mainstream institutional adoption.
Bitcoin
, ether
and other major cap crypto coins surged on the news, and Coinbase
, which is listed as the custodian partner in multiple spot bitcoin ETF applications, was up more than 14% on Tuesday.
“The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said, referring to exchange-traded products. “In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful.”
Grayscale Investments, which manages the world’s biggest crypto fund, initiated its lawsuit against the SEC in June 2022 after the agency rejected its application to turn its flagship bitcoin fund, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.
The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about possible market manipulation and investor protections.
“We are reviewing the court’s decision to determine next steps,” the SEC said in a statement.
A spokeswoman for Grayscale called Tuesday’s ruling “a monumental step forward for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper.”
“The Grayscale team and our legal advisors are actively reviewing the details outlined in the Court’s opinion and will be pursuing next steps with the SEC. We will share more information as soon as practicable,” continued the written statement.
GBTC, which has $16 billion in assets under management as of Tuesday, was the first crypto product investors could trade in their brokerage accounts to get exposure to bitcoin. It was launched in 2013, well before the approval of bitcoin ETFs in Canada or bitcoin futures ETFs in the U.S. Grayscale charges a 2% annual fee to investors, making it a cash cow for parent company Digital Currency Group, led by Barry Silbert.
“It virtually guarantees they will approve BlackRock and Fidelity,” said Dave Weisberger, CEO of CoinRoutes, a platform that provides algorithmic trading and consolidated market data products for digital assets across multiple exchanges and liquidity providers. “Grayscale may need to refile, but they will almost certainly be approved as well.”
Firms have been applying for spot bitcoin ETFs for more than two years, but so far, the SEC has denied more than 30 proposals since 2021 — a 100% rejection rate. But investor sentiment was buoyed in June when BlackRock, the world’s largest asset manager with some $9 trillion in assets under management, put in an application. The firm has had all but one of its previous 575 ETF applications accepted.
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