After a mediocre July, major cryptocurrencies like Bitcoin experienced further losses in August. Fortunately, cryptocurrency prices rose again in the final week of the month when a U.S. Court of Appeals found that Grayscale was improperly denied permission by the U.S. Securities and Exchange Commission to convert its well-liked Grayscale Bitcoin Trust into an ETF.
Midway through August, there was a massive sell-off of bitcoins, which some traders largely attributed to Tesla CEO Elon Musk. Furthermore, according to remarks made by Federal Reserve Chair Jerome Powell at the yearly Jackson Hole Economic Symposium, cryptocurrency investors should get ready for interest rates to stay historically high for a considerable amount of time.
Despite the challenges, crypto investors are hopeful that the market’s strong late-month momentum will continue into September and beyond as a result of the Grayscale court verdict.
Performance of the crypto market in August
Midway through August, the price of bitcoin fell below $26,000, but it quickly recovered to end the month at $27,371, a 5.2% monthly loss. August saw a 7% decline in the price of Ethereum (ETH), which ended the month at $1,716.
With regard to the top 10 most valuable cryptocurrencies (excluding stablecoins), Bitcoin’s little fall in August made it the best performance of the period. The lowest performer, with a loss of 28.2%, was Litecoin (LTC).
Despite the fact that both Bitcoin and Ethereum experienced their worst yearly performance since 2018 last year, cryptocurrency prices have remained stable generally in 2023. Despite the losses in August, the year-to-date price of Bitcoin is still up 66.6%, while the price of Ethereum is up 44%.
Victory in Court for Grayscale
The U.S. Court of Appeals for the D.C. Circuit sided with Grayscale in its case against the SEC, which had rejected Grayscale’s application to convert its well-known Grayscale Bitcoin Trust to an ETF. This decision was the biggest crypto market news of August.
The news was welcomed by investors, which led to an increase in all cryptocurrency values. According to experts, the court decision makes it possible for the first generation of Bitcoin spot ETFs to trade on significant American exchanges.
The ProShares Bitcoin Strategy ETF (BITO), the first Bitcoin ETF to receive SEC approval, was launched in October 2021. However, rather of holding the actual cryptocurrency itself, the BITO ETF and numerous other well-known Bitcoin ETFs that the SEC subsequently approved hold Bitcoin futures contracts. A Bitcoin spot ETF based by cryptocurrency rather than futures contracts has not yet received SEC approval.
In deciding against Grayscale’s proposed Bitcoin ETF, the court remarked on the “absence of a coherent explanation” for the SEC’s decision to approve Bitcoin futures ETFs but not the latter. SEC officials rejected the most recent Bitcoin spot ETF in March 2023 due to investor safety concerns and the potential for cryptocurrency market manipulation.
Grayscale established its Bitcoin Trust back in 2013, and as of today, it is managing more than $17 billion in assets. The GBTC trust only trades over-the-counter in the United States, despite its popularity.
Although the Grayscale court decision was a nice motivator for cryptocurrency values, continued concerns about interest rates prevented Bitcoin and other cryptocurrencies from returning to positive territory in August.
A wave of industry bankruptcies and a decline in the value of the most well-known cryptocurrencies were caused by rising interest rates, which set off the “crypto winter” of 2022. Despite the fact that the US inflation rate has been trending steadily lower during 2023, it is still much higher than the Federal Reserve’s long-term goal rate of 2%.
Fed Chair Jerome Powell reiterated his prior claims that the Fed still has a “long way to go” to control inflation when he gave his yearly speech at the Jackson Hole Economic Symposium in August. Powell added that the FOMC is “prepared to raise rates further if appropriate.”
The FOMC increased its fed funds target range by 25 basis points (bps) in July, bringing it to its highest level in 22 years, which is between 5.25% and 5.5%.
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