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⚡Grayscale and SEC Discuss Bitcoin ETF🤳

Croxroad

09 Nov 2023 — 5 min read

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📧 Grayscale in Talks with SEC

The U.S. Securities and Exchange Commission (SEC) is currently in discussions with Grayscale Investments about their request to transform their GBTC trust product into a spot Bitcoin exchange-traded product (ETF). This development is generating considerable excitement in the Digital currency industry, as SEC approval of such ETFs is seen as a significant milestone that could make it easier for regular investors to get involved in the world of digital assets. Following a recent legal victory, Grayscale has been in contact with both the SEC's Division of Trading and Markets and the Division of Corporation Finance, as they work through the details of this potential game-changing move. These conversations are being kept confidential for now, but the outcome could have profound implications for the BTC world.

Both the SEC's Division of Trading and Markets, as well as the Division of Corporation Finance, play crucial roles in shaping and approving Grayscale's ETF application. Grayscale and CoinDesk are affiliated with the same parent company, Digital Currency Group. Grayscale has a history of interaction with the SEC due to its existing Grayscale Bitcoin Trust (GBTC). However, when it sought approval for an ETF that would directly hold Digital assets, the SEC rejected the proposal. This led to a legal battle in federal court, resulting in a ruling that found the SEC's rejection to be "arbitrary and capricious," ultimately requiring the agency to withdraw its denial. The court's decision was finalised recently, repositioning the application in front of the regulatory body.

Craig Salm, Grayscale's chief legal officer, mentioned that they are currently focused on reengaging constructively with the SEC's Division of Trading and Markets, although he didn't provide specific details about these interactions. Salm acknowledged that there are still some issues to be resolved but expressed optimism, noting that other applicants for Bitcoin ETFs, including financial giants like BlackRock and Fidelity, appear to be making progress in their discussions with the SEC. He suggested that it's now a matter of "when" and not "if" these ETFs will be approved. An SEC spokeswoman declined to comment on the ongoing discussions.

Two weeks ago, when asked about the next steps regarding Grayscale's application and other similar applications, SEC Chair Gary Gensler refrained from providing details. He explained that the commission is currently awaiting recommendations from its staff before making a decision. Interestingly, on the same Wednesday, Gensler shared a video that highlighted the work of the SEC's corporation-finance arm, which deals with "rapidly evolving technology and business models." This particular division's responsibilities will be central to the evaluation of Grayscale's application and other similar requests.

🪗 Bitcoin Surges to $36,000

Recent data from Cointelegraph Markets Pro and TradingView closely tracked the behaviour of Bitcoin (BTC) against a backdrop of significantly high open interest (OI) on various exchanges. As reported earlier, the accumulated OI exceeded $15 billion, a factor that had the potential to bring about fresh market volatility. This led to speculation about the possible direction of BTC's price, with concerns that it might decline, although no one was entirely sure. In the end, the situation turned out differently, as short positions faced pressure and Bitcoin rapidly climbed to nearly $35,900.

Ahead of this price surge, several experienced traders, including the popular analyst Skew, had foreseen this event. Skew pointed out that if the price of Bitcoin were to return to the $34,800 level, it would likely trigger a swift upward momentum, which indeed happened. This situation was driven by the continued increase in open interest, with a growing number of short positions in the mix. Skew had emphasised the significance of the $34,800 price level as a potential catalyst for a short squeeze, and the outcome aligned with his predictions.

Trader Daan Crypto Trades pointed out an intriguing shift in the composition of derivatives trading. He observed that traders on the popular crypto exchange, Binance, were taking bearish positions compared to those on exchange Bybit. However, he emphasised that a "long squeeze" was not guaranteed. He noted that Bybit perpetuals consistently traded at higher levels than those on Binance. The trading data indicated a clear bullish sentiment on Bybit, while Binance traders seemed more inclined towards short positions within a specific price range. A chart comparing BTC/USDT perpetual swap pairs on the two exchanges illustrated Binance's lower position following a short squeeze. The situation sparked curiosity about how this would ultimately resolve, but one thing was evident – Bybit traders displayed a more optimistic outlook compared to their Binance counterparts.

🍳 Trading false breakouts

It's crucial to keep in mind that there are more false breakouts than true ones in trading. Often, beginners rush into breakout trades and end up losing to more experienced market participants. A false breakout occurs when the price briefly moves beyond a significant level and then returns to the previous trading range. This retracement can happen right after the price breaks the level or up to four candles after the breakout, which is known as a bull/bear trap. When you spot reversal candlestick patterns near a breakout level, it's a reliable indicator that the breakout has likely failed. To trade false breakouts effectively, it's best to align your trades with the prevailing trend. Also, note that smaller time frames like M1, M5, and M15 can be too chaotic for trading false breakouts, so it's recommended to analyse H1 and higher timeframes. A specific example of a false breakout is the Fakey pattern, which occurs when there's a false break of an inside bar. When you see an inside bar break and then the break of the parent bar, there's a significant chance that this breakout is indeed false.