As expected, this past week saw a period of consolidation after BTC reached fresh all-time-highs in the days leading up. The following are a couple key events from this time which had notable effects on the market.
Much to the dismay of investors, the SEC has once again denied an application for a BTC spot-ETF. With multiple futures-based ETFs having been approved in the past month, in conjunction with supportive commentary by various Congressmen, many believed that the time had finally arrived for such a product to be approved. When this did not transpire, a short period of consolidation took hold.
While new investors in sector may have been shook by the denial of a spot-ETF, more seasoned market participants recognized that such a product is simply a ‘cherry on top’ and not required for BTC to thrive. Those same investors clearly ‘bought-the-dip’ in the hours following the spot-ETF denial.
Although the SEC and its decision on a spot-ETF may have made headlines, the real news from the past few days is the activation of Taproot. This event marks the first major upgrade to the Bitcoin network since SegWit was enacted roughly 4 years ago.
Industry pundits view this upgrade as significant for a few primary reasons.
- By replacing ECDSA with Schnorr signatures, transactions on the Bitcoin network will not only boast higher levels of privacy, but become smaller and quicker at the same time.
- For all its strengths, Bitcoin has often been viewed as being less flexible that other networks like Ethereum. With the introduction of smart-contracts, this becomes much less of an issue, with the upgrade allowing for Bitcoin to support self-executing or ‘smart’ contracts. While the use-cases for smart contracts are many, the most notable is eliminating the need for an intermediary in transactions (thereby decreasing both fees and time required).
- Although Bitcoin has undergone various upgrades over its lifespan, many worried how such an event would play out now that BTC has become so mainstream. Would the consensus mechanism used still facilitate such a move? Would network miners break out in to another ‘civil war’? Or would unexpected bugs be introduced, diminishing trust in the network? Thankfully, each of these worries appears to have been needless, with the upgrade being implemented seamlessly.
Market Reaction & Metrics
As previously stated, the denial of a spot-ETF provided savvy investors with a opportunity to ‘buy-the-dip’. This opportunity was short lived however, with the activation of Taproot becoming a predicable boon to market prices.
With the consolidation from recent ATHs seemingly finished, Bitcoin and the broader digital assets market appear poised to continue to their impressive rally. Various commonly referenced metrics support this such as the ‘Fear and Greed’ index (72 at time of writing), and PlanB’s S2F model. Notably, the latter continues to indicate that we can expect a monthly close around $98,000, and a yearly close of $135,000.
With an uncanny ability to predict monthly closes shown on various occasions over the past year, it is no wonder that an increasing amount of investors are watching the S2F model closely.