What’s Behind the Bitcoin Surge

Bitcoin soared following a U.S. Court of Appeals ruling Tuesday that the Securities and Exchange Commission erred in denying crypto asset manager Grayscale Investments permission to convert its widely used bitcoin trust into an exchange-traded fund.

The decision in favor of Grayscale followed its October 2022 lawsuit challenging the SEC’s decision to block the crypto firm from converting its bitcoin trust to a low-cost ETF.

The price of bitcoin jumped more than 5% to $27,471.59 following the news.

“This is a historic milestone for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper,” said Grayscale chief executive officer Michael Sonnenshein in a statement. “Grayscale has adhered to U.S. financial rules and regulations in building our product suite since our founding in 2013, underpinned by one fundamental belief: investors deserve transparent, regulated access to crypto. It’s incredibly exciting that we are one step closer to making a U.S. spot Bitcoin ETF a reality.”

The case has been watched closely by cryptocurrency followers, who say a bitcoin ETF would make cryptocurrency more available to ordinary investors.

“Despite the inevitable SEC appeal, to our mind there is no doubt now, spot BTC ETFs are coming to the U.S.,” said Tim Bevan, the CEO of ETC Group, a digital assets news website, in an emailed statement. “The level of pent-up institutional and retail demand in the U.S. is significant, and we expect this to have a positive impact on the price of Bitcoin as can be seen from today’s price reaction, as well as further accelerate the global trend towards acknowledging crypto as a new asset class.”

Grayscale is the world’s largest digital currency asset manager, with more than $55 billion in assets under management as of late 2021, the company said in court filings.

The SEC first denied Grayscale’s application to convert its bitcoin to a spot ETF backed by physical bitcoins in June 2022. In a petition filed that same day, Grayscale said the SEC’s decision was “arbitrary and capricious.”

Grayscale is not the only fund to apply for ETF approval from Wall Street's regulator. In June, BlackRock's iShare unit and Fidelity Investments filed applications with the SEC to form a spot bitcoin ETF. About 30 attempts have been made to seek approval from the SEC for the funds, according to Bloomberg Intelligence. Spot funds issue and redeem their shares according to investors' demands.

 Update 2:30 p.m. ET: Updated to include a statement from Grayscale.