Markets Weigh Up July Figures: Bitcoin Recovers from SEC Rejection of Spot ETFs, Alts Rocked by Volatility

The US Securities and Exchange Commission (SEC) on Friday knocked back filings for spot bitcoin exchange-traded funds (ETFs) from Nasdaq and Cboe Global Markets exchanges, citing a need for more clarity in the respective applications. The Gensler-led agency claimed inadequacy of details about surveillance sharing arrangements (SSA) in the submissions from the exchanges.

Market commentators remarked on the commission's feedback, clarifying that the response didn’t imply that spot ETFs are out of the question. Nonetheless, the rejection news reported by Wall Street Journal shook crypto markets, with Bitcoin briefly dipping below $29,770 and ending a seven-day streak of changing hands above $30K. The flagship asset swiftly bounced back, retesting the stiff psychological mark ahead of the weekend to seal a deviant monthly and solid quarterly close.

BTC/USD daily chart. Source: TradingView

In the last few hours, Bitcoin (BTC) has slowed on its mild upside potential above $30,500 and was last spotted at $30,630 early Monday. Meanwhile, some prospective issuers have updated their applications to include their market surveillance partners and refiled them.

To learn more about Bitcoin, check out our Investing in Bitcoin guide.

Spot Bitcoin ETF rejection wraps up June action

Last Thursday, asset management firm Fidelity reaffirmed its interest in winning approval for a spot bitcoin ETF by filing fresh paperwork after its failed attempt to get approval for the Wise Origin bitcoin ETF in 2021. Fidelity has been active in the digital assets space and collaborated with Citadel Securities and Charles Schwab last month to back EDX Markets, which launched on June 20 with support for four cryptocurrencies: Bitcoin, Ether, Litecoin and Bitcoin Cash.

Industry executives pushing for the first spot Bitcoin ETF in the US market contend that these funds are ideal vehicles for institutional investors seeking exposure in the sector. Still, the SEC has denied every spot application filed to date while approving ETFs based on bitcoin futures.

“The SEC's refusal to approve these products for a decade has been a complete and utter disaster for US investors and demonstrates how the SEC is a failed regulator. Here's why: -“protected” investors from the best performing asset of the last decade -pushed investors into toxic products like the Grayscale Bitcoin Trust (GBTC) which trades at a massive discount to NAV and charges astronomical fees -pushed spot bitcoin activity offshore to unlicensed and unregulated venues.” Gemini cofounder said in a late Sunday tweet.

BlackRock, the world's leading fund manager, filed for a Bitcoin ETF on June 15, kickstarting the asset price's rebound to new yearly highs above $30,000. Ark Investment, WisdomTree and Invesco have submitted proposals for similar funds (with revised filings made on June 30), while Grayscale had its request to convert its flagship GBTC fund into a spot ETF rejected.

Bitcoin shows strength in the face of mildly negative catalysts

Bitcoin and most altcoins continued holding onto the Friday levels over the weekend. Coinglass historical data shows Bitcoin has never recorded double-digit % negative returns in July.

“BTC has performed a bullish monthly close but is primed for a healthy technical retest at ~$29250. With price currently around $30500. I wonder what negative catalyst will soon emerge to facilitate this technical retest,” pseudonymous analyst Rekt Capital wrote.

June's display of volatility culminating in 12% monthly returns and 20% gains across Q2, has prompted many speculators to bet on more gains for the leading crypto closer to $35,000. Simultaneously, some analysts warn coming weeks may provide a few upsides as opposed to history.

Bitcoin monthly candles

Market data shows that Bitcoin has remained appealing to buyers, notwithstanding the recent rejection of ETF applications by the US SEC. Traders have equally painted an inspiring picture, showing no eagerness to take profits en masse at current prices motivated by the optimism in the claiming the next target profit range between $31,550 and $38,000. Glassnode data indicates that the conviction of long-term holders has grown, suppressing selling pressure around the $30K range. The Long-Term Holder Market Value to Realized Value metric that tracks the profitability of coins held for more than 155 days shows the holder group is 47% in the green on their position.

Altcoins swing on multiple narratives

The SEC waged a war against altcoins in June after it named Solana (SOL), Cardano (ADA), Polygon (MATIC) and BNB (BNB) as unregistered securities in two different lawsuits affecting Binance.US and Coinbase. In light of these developments, UK-based FinTech Revolut notified its US customers this week that it will delist ADA, MATIC, and SOL for its US customers in September, citing the ongoing regulatory changes. Earlier in the month, Robinhood, eToro and Bakkt informed users of ADA, MATIC and SOL delistings following their classification as securities by the SEC.

ADA, MATIC, SOL price charts

Elsewhere, Celsius could dump ADA, MATIC, SOL tokens this month as part of its bankruptcy proceedings. Bankruptcy Judge Martin Glenn granted the crypto lender, which held positions in several altcoins, including 90 million MATIC, 103 million ADA, and 161,000 SOL, as of last November, approval to wind down its alt positions in favor of Bitcoin and Ether. The latter will ultimately be distributed to creditors per its proposed cryptocurrency distribution.

“[Celsius] may sell or convert any non-BTC and non-ETH cryptocurrency, crypto tokens, or other cryptocurrency assets other than such tokens that are associated with Withhold or Custody accounts (collectively, the “Altcoins”) to BTC or ETH commencing on or after July 1, 2023.” said in a June 30 ruling.

Litecoin (LTC) separately stood out as a notable performer among the top 100 cryptocurrencies by market capital this week after breaching the $110 mark for the first time since April 2022. LTC has been at the top of many speculators' watchlists, especially in recent months, as its halving event expected at block 2,520,000 draws near. The LTC/USD pair was trading at $110 at writing, up 57% since the start of the year.

Litecoin (LTC) YTD gains

In anticipation of the third halving cycle with a timeline of early August, the Litecoin network's hash rate has climbed to a record high, BitInfoCharts data shows. The hash rate traced a similar growth in the preceding halving event in 2019, which saw block rewards fall from 25 LTC to 12.5 LTC per mined block.

Litecoin network historical hash rate chart

Positive report around Ripple in late May, specifically the expectation of a favorable outcome in the Ripple vs. SEC case provided upside momentum to XRP price into early June, but the token's course has been underwhelming since mid-June. XRP was at writing, hovering around $0.48 – down 6.60% in the last 30 days. Friday news of Wall Street giant Citigroup reconsidering its deal with Metaco – a crypto custodial firm Ripple acquired for $250 million – mark the latest momentum-stalling event.

XRP/USD chart

In a June 30 report, Bloomberg noted that the investment bank was reviewing its partnership with Metaco. Sources familiar with the matter said the global banking and financial services provider could consider replacing the Switzerland-based firm as its provider only a year since the two entered into the agreement. The Citigroup news pushed the XRP/USD pair below $0.45 briefly ahead of the weekend before recovering sharply.

To learn more about Ripple or Litecoin, check out our Investing in Litecoin and Investing in Ripple guides.

Bitcoin Cash (BCH) was also one of the top gainers in the last week of June, benefitting from news of the token's listing by Wall Street-backed EDX Markets. BCH price soared to a 14-month high above $325 on some exchanges. The Bitcoin fork token experienced a surge in volume on exchanges, including South Korean trading platform Upbit on Friday.

Bitcoin (BCH) gains to date

This week's market volatility prompted significant liquidation in both longs and shorts. CoinGlass data shows that more than $100 million was liquidated on Wednesday followed by a larger volume of $216 million on Friday. Bitcoin Cash accounted for a significant share on the latter date. Speculators cumulatively (long and short bets) lost over $25 million on BCH-tracked futures as the token registered a 35% upswing on the last day of the month, bringing its June cumulative gains to 170%.

To learn more about Bitcoin Cash, check out our Investing in Bitcoin Cash guide.

Macro uncertainties: June FOMC minutes and upcoming Q2 earnings

The US macroeconomic landscape was mostly bland for risk asset markets last week as Personal Consumption Expenditures (PCE) Index data came in fairer than expected, hinting at a slowing inflation. Nonetheless, markets have expressed confidence in an outcome of interest rate hikes returning in July as data from CME Group’s FedWatch Tool presents a 90% probability of an upcoming 25-basis-point hike.

Fed target rate probabilities. Source: FedWatch tool

Market participants have in their sights the Federal Open Market Committee’s (FOMC) meeting, whose minutes' release on Wednesday could provide hints on the Fed’s future monetary policy. Later in the week, the US non-farm payroll (unemployment numbers) report offering insights into the status of the labor market is expected on Friday. Separately, Q2 earnings numbers from some of the S&P 500 companies are expected to start arriving next week. Citigroup and JPMorgan are expected to release the quarterly report card on July 14, while Google, Apple, Meta, Microsoft and Amazon are expected to share their reports before July 27.