Bitcoin
got a huge bump in mid-June, after
BlackRock
and several other exchange-traded fund issuers applied to launch the first Bitcoin ETFs. But since then, the oldest crypto has been stuck in a range, drifting some 3.9% lower to $29,300 in the past month.
There is no telling what, exactly, could spur another buying wave for
Bitcoin
and other tokens, but analysts for Bernstein identified several themes that could be catalysts in the coming months. Here are three to look out for.
Bitcoin Is Being Integrated Into the Broader Economy
By this fall, a federal court is expected to decide whether the Securities and Exchange Commission erred when it rejected an application by Grayscale Investments to convert the
Grayscale Bitcoin Trust
(ticker: GBTC) into an ETF. The SEC said the Bitcoin market has insufficient safeguards against fraud and manipulation, while Grayscale argues there is no reason to treat Bitcoin ETFs differently than the Bitcoin futures ETFs, such as ProShares Bitcoin Strategy (BITO), that the SEC has already approved.
The judges likely won’t order the SEC to approve Bitcoin ETFs outright, but if they side with Grayscale, they could make it much more difficult for the SEC to keep such funds off the market. One crypto firm estimated that the approval of Bitcoin ETFs could increase demand for the token by $30 billion as investment advisors and other institutions pile in. That would no doubt drive the price higher.
In addition, while the Bitcoin network was traditionally limited to transferring tokens, lately Bitcoin developers have begun to put other applications on its blockchain, Bernstein noted, a move that could perhaps bolster coins’ value.
The Ethereum Blockchain Is Finally Hitting Its Stride
Ethereum,
whose token “ether” is the second-largest crypto, always had the goal of becoming a decentralized network for myriad financial applications, but not until lately has that seemed feasible. While the network used to process around 15 transactions per second, far less than the thousands needed to be useful in the real world, now the projects that use it can reach nearly 3,000, Bernstein says.
What that opens up is the ability for institutions to “tokenize” real-world assets, like Treasuries and real estate. Asset managers such as WisdomTree (WT) have already released apps to trade tokenized assets on some blockchains. Using traditional networks, it might take days for the sale of a stock or bond to settle, but using blockchains the transaction can be completed in seconds.
“This opens up all kinds of application-based innovation across financial services and consumer applications. This is not in the future, the infrastructure is ready today,” the Bernstein analysts wrote.
Like Bitcoin, Ether has soared this year but has lately been stuck in a rut. The token is up 55% in 2023 but down 3.8% in the past month to $1,860. If Ethereum starts to power real-world transactions, that could change quickly.
World Governments Are Warming to Crypto
Monetary authorities including those of Europe, Singapore, China, and the U.S. are deep into experimenting with issuing their own central bank digital currencies. The Bank for International Settlements has helped coordinate projects to speed cross-border transactions, while major private banks and international organizations are also studying how crypto might replace existing infrastructure.
It isn’t yet clear whether CBDCs will end up using the private blockchains already in existence or if central banks will decide to rely on bespoke systems. But some blockchain firms, such as Ripple, are already selling their services to the banks, and tokens like XRP could end up benefiting from the association, Bernstein says.
“The market is missing the fast progress in convergence of crypto rails with digital ‘fiat currencies,’” the analysts said.
Write to Joe Light at joe.light@barrons.com
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