How Bitcoin whales celebrated Grayscale’s victory
- BTC reclaimed the $27,000 price mark following the court’s decision in Grayscale’s case against the SEC.
- Prior to the news, some BTC whales had accumulated a significant volume of the leading coin.
On 17 August, unexpected violent sell-offs in the Bitcoin [BTC] market sent the king coin’s price below $25,000 for the first time since 20 June. This deleveraging event resulted in the removal of $2.5 billion worth of open interest from the futures markets within a few hours.
Read Bitcoin’s [BTC] Price Prediction 2023-2024
As sentiment grew poorer, BTC’s price stagnated at $26,000 in the days that followed. On a daily chart, key momentum indicators plunged to two-year lows, suggesting a significant decline in coin accumulation.
However, during the intraday trading session on 29 August, BTC price rallied above $27,000, regaining its price point prior to 17 August. This surge in price was a result of increased network activity post Grayscale’s victory against the Securities and Exchange Commission [SEC].
— James Seyffart (@JSeyff) August 29, 2023
A trip down memory lane
In October 2021, Grayscale Investments, the world’s largest digital currency asset manager, filed with the SEC to convert Grayscale Bitcoin Trust (GBTC) into a Bitcoin spot ETF. The firm decided to do so after the regulator greenlighted similar applications made by ProShares, Valkyrie, and VanEck in the same year.
However, by June 2022, the SEC denied Grayscale’s request, citing that the firm’s application did not fulfil its anti-fraud requirements or meet its investor protection standards.
On the same day, Grayscale filed an appeal with the federal appeals court for the District of Columbia, asking for a review of the agency’s decision. In an opening brief filed in October 2022, the digital currency asset manager argued that, by denying its own application, the SEC had acted “arbitrarily and capriciously.”
We’ve filed the opening brief in our lawsuit against the SEC, challenging their decision to deny our application to convert $GBTC to a spot Bitcoin ETF.
A “brief” thread:
— Grayscale (@Grayscale) October 12, 2022
By December of the same year, the SEC filed its 73-page respondent’s brief. The regulator argued that the ETF applications it had approved only contained futures contracts that traded on the Chicago Mercantile Exchange (CME).
Grayscale, in its application, failed to proffer arguments in support of the fact that the CME’s surveillance of futures trading would:
“Sufficiently detect and deter fraud and manipulation targeting the Bitcoin spot market.”
Grayscale responded with a reply brief on 13 January 2023, wherein it doubled down on its position that the agency failed to justify its different treatment of Bitcoin futures and spot Bitcoin ETFs. The firm added that its denial order was discriminatory and harmful to investors.
The brief argued:
“There is a 99.9% correlation between prices in the Bitcoin futures market and the spot Bitcoin market.”
Also, arguing the SEC exceeded its regulatory powers, Grayscale stated:
“The Commission is not permitted to decide for investors whether certain investments have merit – yet the Commission has done just that, to the detriment of the investors and potential investors it is charged to protect.”
How much are 1,10,100 BTCs worth today?
Victory at last for Grayscale?
In a ruling delivered on 29 August, the DC Circuit Court of Appeals agreed with Grayscale and asked the SEC to review its decision.
In the court’s opinion, which was filed by Judge Neomi Rao of the D.C. Court of Appeals, stated:
“The Commission’s unexplained discounting of the obvious financial and mathematical relationship between the spot and futures markets falls short of the standard for reasoned decision making.”
Bitcoin holders are the biggest winners
After the news of the court’s decision broke, BTC’s social activity surged. According to Santiment, the coin’s social volume immediately climbed by 7% as discussion around the leading cryptocurrency soared.
? After the news of #Grayscale's victory over the #SEC quickly lifted #crypto markets, the biggest notable beneficiary actually has turned out to be #BitcoinCash, due to its increased exposure. This phenomenon was similar to what we saw in mid-June when the #ETF news was first pic.twitter.com/HzEEEqZqIt
— Santiment (@santimentfeed) August 29, 2023
A corresponding hike often follows the growth in an asset’s social activity in its price. This has been the case for BTC. Trading at $27,488 at press time, the coin’s value has increased by 6% in the last 24 hours.
On-chain data provider Santiment also postulated that BTC whales might have been aware of the court’s decision before it was made public. Inasmuch, BTC’s whale wallets revealed that addresses holding between 10 and 10,000 BTCs had cumulatively purchased coins worth $388.3 million a day before the news was made public.
? Whales & sharks may have known a thing or two about the outcome of the #Grayscale and #SEC lawsuit, with 10-10K $BTC wallets accumulating a collective $388.3M in $BTC the day leading up to the news. They were handsomely rewarded with a +6% price jump. https://t.co/j28CwVYKS6 pic.twitter.com/cx5rRuS6IV
— Santiment (@santimentfeed) August 30, 2023
When the news broke, and BTC’s price rallied, these investors quickly booked their gains.