Bitcoin (BTC) price experienced a significant surge today, rising by 5% and reaching a two-week high above $28,000. This sharp increase comes after U.S. Court of Appeals Circuit Judge Neomi Rao ruled in favor of Grayscale Bitcoin Trust (GBTC) in its case against the U.S. Securities and Exchange Commission (SEC). This decision has further amplified the growing institutional interest in Bitcoin, with companies like BlackRock and Fidelity Investments awaiting answers regarding their BTC spot ETFs on September 2.

The rally in Bitcoin price commenced on August 29 when Judge Rao overturned the SEC’s order to deny the GBTC spot ETF due to fraud concerns. While this ruling does not directly approve the spot ETF, it signifies a victory for Grayscale as the judge granted their petition for review and vacated the Commission’s order. As a result, the discount on the Grayscale ETF is approaching its highest levels since 2023, dropping below 25%.

Despite several applications, the SEC has consistently refused to approve a spot Bitcoin ETF. Prominent institutions like BlackRock, Fidelity, Cathie Wood’s ARK, and 21Shares, which has made three filing attempts for approval, have all faced rejection. Notably, BlackRock, which manages over $8.5 trillion in assets, plans to utilize Coinbase for the custody of BTC in their trust, as stated in the filing with the SEC. In September, the SEC has several ETF decisions to make, including approvals, denials, or delays.

Concurrently with the surge in Bitcoin price on August 29, the supply of BTC on exchanges is declining to its lowest level since January 2018. The market perceives this trend as a bullish signal, as traders typically withdraw their BTC from exchanges when they intend to hold it in self-custody for the long term. Interestingly, on-chain data reveals that exchanges have been reducing their Bitcoin holdings since May 18, 2023. This indicates that a significant number of Bitcoin investors are anticipating a price rally, even in the midst of the prolonged bear market trend of 2023.

As more Bitcoin continues to leave exchanges, the cushion for liquidations decreases, resulting in heightened volatility. In the past 24 hours alone, short positions totaling over $46.5 million in BTC have been liquidated, with more than $100 million in shorts being liquidated across the entire crypto market. Despite the losing streak of short-sellers, 48% of the futures market remains short on Bitcoin price. This high ratio of short positions presents a potential opportunity for a short-squeeze, which could lead to a further increase in Bitcoin price.

While Bitcoin price has shown bullish momentum in the short-term following the Grayscale ruling and the liquidation of short positions, the Bitcoin Fear & Greed Index indicates that the market still exhibits fear. The index is down by over 13 points compared to the previous month, suggesting that there are still concerns among investors. However, the recent legal development and institutional interest in Bitcoin provide a positive outlook for its future prospects.

The recent ruling by U.S. Appeals Judge Neomi Rao in favor of Grayscale Bitcoin Trust against the SEC has resulted in a surge in Bitcoin price. This decision has also highlighted the ongoing struggle to approve a spot Bitcoin ETF, despite the interest from major institutions like BlackRock and Fidelity. The decrease in BTC supply on exchanges, along with the potential for a short-squeeze, further contributes to the current market dynamics. While the fear amongst investors persists, the overall sentiment towards Bitcoin remains cautiously optimistic.

Analysis

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