Coinbase, Bitcoin Miners Extend Gains as BTC Surges on BlackRock ETF Hopes

Shares crypto-related companies surged for a second straight day after bitcoin [BTC] traded above $34,000, fueled by hopes that a spot-price exchange-traded fund (ETF) for the largest cryptocurrency may finally be approved by the U.S. Securities and Exchange Commission (SEC).

Stocks of crypto exchange Coinbase (COIN), software company MicroStrategy (MSTR) – which held more than 158,000 bitcoin on its balance sheet – and crypto financial services firm Galaxy Digital (GLXY) all rose more than 14% on Tuesday at press time.

Bitcoin mining companies such as Marathon Digital (MARA), Riot Platforms (RIOT), CleanSpark (CLSK) and Mawson Infrastructure (MIGI), which are more exposed to price movements of the digital currencies, added more than 15%.

The S&P 500 and Nasdaq equity indexes were also in the positive, snapping a five-day losing streak.

The rally in the crypto-linked stocks was driven by bitcoin's sudden surge on Monday, which saw the price climbing all the way to $35,000. The optimism started after the proposed BlackRock ETF showed up on the website of Depository Trust & Clearing Corp. (DTCC) – a key U.S. market utility that processes all securities transactions – with the ticker $IBTC.

Read more: A Wild Few Minutes Drive Bitcoin Above $35,000 as ETF Excitement Starts to Thaw the Crypto Winter

The optimism surrounding a potential spot bitcoin ETF was started earlier this year when giants of traditional finance (TradFi) like BlackRock filed for spot ETF with the SEC.

If one is approved, the asset managers will need to buy, own and store the digital assets for their clients, similar to a physically backed gold ETF, potentially boosting the price of the underlying cryptocurrencies and the whole sector.

"Authorised participants will have to buy bitcoin [if a spot ETF gets approved] in order to create shares for an eventual ETF, which will result in significant flows to buy an increasingly illiquid supply of bitcoin," said CoinShares head of research James Butterfill.

If bitcoin's rally extends as far as $40,000, there will be a significant shift in investors' outlook for bitcoin, Butterfill said. "Market participants would be in full anticipation of it being 'mainstreamed' and accepted as a major asset class (like existing ones such as gold etc.)."

However, he cautioned that given the volatile nature of the digital currency, the price could quickly move the other way if there is any negative news regarding the timeline of the approval.

"Any detriment to the early ‘24 timeline for Spot ETFs could have a negative impact on prices and we could be trading in the high 20s again. Although, given recent events, this scenario seems increasingly unlikely."

Read more: Institutions Race for Bitcoin, Sending CME Open Interest to Record High