Bitcoin soars, Coinbase stock pops after Grayscale vs SEC latest loss

Investors flocked to cryptocurrencies and related equities after the US Securities and Exchange Commission suffered its latest loss in court.

Grayscale won its appeal against the SEC on Tuesday, driving prices higher after a week of subdued price movement.

The court reversed a lower court’s ruling, which had supported the regulator’s rejection of Grayscale’s bid to turn its trust into a Bitcoin exchange-traded fund.

Bitcoin jumped 7% to trade above $28,000 for the first time in 12 days. The price increase saw the leading cryptocurrency by market capitalisation add around $40 billion to its market cap, soaring to $545 billion.

Investors appeared to return to the market following the news, with crypto prices rising across the board. Ethereum jumped 4.8%, Binance-affiliated BNB added 4.6%, and Ripple gained 3.3% in the past day.

The price moves in crypto markets may be exacerbated by low liquidity conditions at present.

Kaiko Research said last week that despite being more stable, Bitcoin’s market depth is still 50% below its pre-FTX highs. As prices moved lower last Thursday, Bitcoin’s market depth plunged to 2,000 BTC from 5,000 BTC. During times of low liquidity, prices are prone to sharp moves.

Crypto-related stocks also appeared to benefit from the news. Shares in crypto exchange Coinbase added 14%, to trade around $84. The exchange itself could benefit from the approval of a spot Bitcoin ETF as it has been named as the custodian in BlackRock’s application.

If the world’s largest asset manager were successful in its application this could prove a regulatory bump for Coinbase, which it used as part of its surveillance sharing agreement.

Michael Saylor’s MicroStrategy jumped 11% to about $381 following the news. Saylor’s firm holds around 152,800 Bitcoins.

“The District of Columbia Court of Appeals has paved the way for bitcoin exchange-traded funds,” Saylor tweeted after the verdict.

The decision was called an “utter rebuke of all the SEC’s spot Bitcoin ETF denial orders,” by Bloomberg Intelligence ETF analyst James Seyffart.

“There is no wiggle room — basically all of the SEC’s arguments are shot down here. But the decision is going back to the SEC. What can the SEC do?” Seyffart said on X, formerly Twitter.

The regulator has 45 days to digest the decision and could appeal. This is by no means an approval of a spot Bitcoin ETF, but removes a significant hurdle.

Grayscale’s discount to net asset value, basically how much shares in the trust are worth relative to the Bitcoin it holds, narrowed immediately after the news. GBTC’s discount narrowed to 20% from 25% a day ago.

This is the second courtroom setback for the SEC this summer after crypto company Ripple partially won its case against the regulator in July. The market watchdog plans to appeal that ruling, potentially setting the stage for another clash with Ripple in the second quarter of 2024.

Adam Morgan McCarthy is DL News’ London-based Markets Correspondent. Got a tip? Reach out at adam@dlnews.com.