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SEC Wants to Define Ether as a Stock, Bitcoin Rebounds
Key points
- The Securities and Exchange Commission (SEC) is reportedly building a case to classify ether as a security.
- Bitcoin rebounded on Monday, surpassing $70,000 for the first time in five days.
- On Tuesday, bitcoin recorded its biggest one-day price drop since the collapse of cryptocurrency exchange FTX.
- BlackRock has launched a tokenized fund on the Ethereum network backed by traditional assets such as US Treasuries.
- After seeing spot Bitcoin exchange-traded fund (ETF) inflows turn into outflows last week, analysts are now tracking the feasibility of approving a spot Ether ETF by the end of May.
What happened in the cryptocurrency markets last week?
The cryptocurrency market shook off some of last week’s jitters, returning to positive territory on Monday. Bitcoin rebounded above $70,000 and gains were seen on crypto tokens and cryptocurrency-related stocks.
After reaching a series of all-time highs in the previous weeks, spot bitcoin exchange-traded fund (ETF) inflows dried up and bitcoin’s price recorded its biggest single-day drop in more than two years. In the meantime, ether has found itself in the spotlight following reports that the Securities and Exchange Commission (SEC) is seeking to classify it as a stock.
Despite this negative news, global investment firm BlackRock has revealed a new tokenized fund on the Ethereum network.
The SEC has reportedly targeted Ethereum
The SEC is pursuing an investigation to classify ether (ET), the native cryptocurrency of the Ethereum network, as a security, Fortune reported. Companies that have received subpoenas related to this investigation said the SEC is requesting documents and financial records regarding their dealings with the Ethereum Foundation, which is the Switzerland-based nonprofit organization overseeing the operation. blockchaingovernance and development.
The investigation appears to have gained traction after the completion of Ethereum’s transition to a proof-of-stake model in September 2022. The SEC perceives this network change as an investment contract, which could potentially qualify Ether as a safety under the jurisdiction of the agency.
In particular, this development could signal a derailment of the cryptocurrency industry’s hopes of getting the spot approved by the SEC Ether ETF in the next future. That said, according to a report by Forbes, a number of spot ether ETF applicants have indicated that they would be willing to accept the cryptoasset’s designation as a security.
Bitcoin Experiences Biggest Single-Day Drop Since FTX Collapse
Bitcoin (Bitcoin) returned above $70,000 on Monday morning, after sharp declines last week. The largest cryptocurrency fell below $62,000 by March 20, after optimism about spot bitcoin ETFs pushed the price to several highs, the most recent of which topped $73,000 less than a week earlier.
Last week’s sharp drop was particularly noteworthy, as it was more than 8% and represents the largest single-day drop for the crypto asset since November 2022 in the midst of the collapse of the now defunct cryptocurrency exchange FTX.
“Volatile price activity appears to have been most concentrated during U.S. business hours,” Kaiko Research said Monday, adding that “the current spike in volatility follows a period of unusually low volume and volatility, making the most pronounced recent fluctuations”.
According to BitMEX Research, net outflows for spot Bitcoin ETFs have been at all-time highs during the sharp price decline. Outflows peaked on Tuesday last week at about $326 million, and the numbers the next day weren’t much better, with investors withdrawing about $261 million.
Last week’s outflows were likely due to a bankruptcy case involving cryptocurrency lender Genesis, according to Bloomberg analyst James Seyffart. Just the previous week, spot bitcoin ETF inflows had reached all-time highs.
BlackRock launches tokenized fund on Ethereum
Black Rock (BLK) presented its tokenized asset fund built on the Ethereum blockchain. The BlackRock USD Institutional Digital Liquidity Fund, represented by the BUIDL token, is fully backed by cash, U.S. Treasury bills and repurchase agreements.
Token holders will receive daily yield payments facilitated by the Ethereum network. Other major participants in the project include Securitize, BNY Mellon, Anchorage Digital Bank NA, BitGo, Coinbase Global (CURRENCY) and Fireblock. BlackRock also made an undisclosed investment in transfer agent Securitize.
BlackRock also has a spot ether ETF application under scrutiny at the SEC, and CEO Larry Fink previously discussed the tokenization promise in a July 2023 interview with Fox Business, shortly after the investment firm filed its bitcoin spot ETF application.
What to expect from the markets this week
While bitcoin has recovered somewhat from last week’s lows, analysts are waiting to see whether spot inflows into bitcoin ETFs can turn positive again. In particular, BlackRock’s iShares Bitcoin Trust (IBIT) is closing the gap with Grayscale Bitcoin Trust (GBTC) in terms of total assets under management (AUM) and could soon take over the role of the largest spot bitcoin ETF.
As is often the case, bitcoin’s rise brings with it other cryptocurrencies and cryptocurrency-related stocks. Ether traded up about 7% on Monday, while Solana (SOL) gained almost 10%. Shares of Microstrategy Inc. (MSTR) rose about 20%, while Coinbase shares rose more than 8% in afternoon trading Monday.
Elsewhere, the declining odds of spot ether ETF approvals by the end of May provided by both analysts and prediction markets are on the minds of those who want to see bitcoin’s bull run spread to the rest of the cryptocurrency market. It’s also unclear whether staking would be allowed in a potential spot ether ETF, as outlined in a recently reviewed application for one filed by Fidelity.