Bitcoin, Ether, and all other top 10 non-stablecoin cryptocurrencies gained in Wednesday afternoon trading in Asia, as traders celebrated digital currency asset manager Grayscale’s victory against U.S. Securities and Exchange Commission (SEC). The market boost follows last week’s largest outflows of digital asset investment products since March, in what has been an unusually low trading volume market. In the non-fungible token (NFT) market, the Forkast 500 NFT Index fell as traders gauged the latest SEC charges against an NFT project operated by media company Impact Theory for breaching securities laws. 

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Beacon of hope

Bitcoin gained 5.54% to US$27,434 in 24 hours to 4 p.m. in Hong Kong, bringing its weekly gains to 5.32%, according to CoinMarketCap data. The largest cryptocurrency in the world had traded under US$27,000 since Aug. 18 as macroeconomic developments in the U.S. and China weigh on the crypto market. 

Ether, the world’s second biggest cryptocurrency, gained 4.31% to US$1,717 and posted a 4.45% gain on the week.

All other top 10 non-stablecoin cryptos rose after a favorable verdict for Grayscale Investments in its ongoing legal dispute with the SEC.

The market boost follows last week’s record outflow of digital asset investment products – totaling US$168 million – the largest outflow since the U.S. regulatory crackdown on exchanges in March, according to a report by European cryptocurrency investment firm CoinShares. 

“This August’s outflows now total US$278 million in what has been an exceptionally low trading volume market, with investment products trading US$1.3 billion for the week, 16% below the year average. This negative sentiment we believe is due to the increasing acceptance that a spot-based ETF for Bitcoin in the U.S. is likely to take longer than many expect, with recent delays being announced by the SEC,” CoinShares said in an emailed report on Tuesday. 

Crypto markets picked up on Wednesday after the District of Columbia Court of Appeals overturned the SEC’s earlier refusal to allow the company’s Grayscale Bitcoin Trust, known by its ticker GBTC, to become an exchange-traded fund (ETF). Grayscale first sued the SEC in June, 2022. The digital asset manager said that the regulator failed to provide clear explanations for the rejection of its ETF application, violating the Administrative Procedure Act. The company added that the SEC’s refusal was inconsistent with its approach to other Bitcoin futures ETF applications.

“The market reaction to Grayscale winning the lawsuit against the SEC shows that the digital asset industry is held back due to a lack of regulatory framework,” Shivam Thakral, chief executive of Indian digital asset exchange BuyUcoin, said in an emailed statement on Wednesday.

“The wave of positive developments has come as a fresh lease of life for the crypto industry which has been battling hostile regulations, dampened investor mood, and crypto winter. We are optimistic that Grayscale getting court approval for Bitcoin ETF will work as a template for similar financial products around the world,” Thakral said.

“Grayscale’s legal victory against the SEC marks a significant shift in digital assets,” Caroline Bowler, chief executive of Australian digital asset exchange BTC Markets, said in an emailed statement on Wednesday.

“It’s important to clarify it is not a ruling in favor of converting its fund into a spot Bitcoin ETF, as some might have anticipated. Instead, the presiding judge granted Grayscale’s petition for review and simultaneously vacated the commission’s order. This development underscores the complexity of regulatory dynamics in the crypto space, where legal battles can shape the path of innovative financial instruments,” Bowler explained. 

The ruling is seen as a beacon of hope for Grayscale and is expected to chart the course for other financial giants, such as BlackRock and Fidelity, who have also filed spot Bitcoin ETF applications with the SEC and are waiting for an approval. 

“It’s excellent that the judge in the Grayscale vs SEC case was able to see the obvious correlation between Bitcoin futures and spot price,” Greg Moritz, chief operating officer at AltTab Capital, said in an emailed statement.

“Products like Grayscale’s holdings have converted to ETFs in other commodity markets, and it makes no sense to treat crypto differently. Rules for financial markets need to be based on data, not arbitrary and capricious sentiment toward a legitimate and growing asset class,” Moritz said.

Mahin Gupta, founder of Liminal, a wallet infrastructure and custody solutions platform, said he is particularly “excited” about the implications of this ruling for the custody industry. The approval of a spot Bitcoin ETF is expected to create a demand for custody solutions which is likely to boost the custody industry and help accelerate adoption of digital assets by institutional investors. 

“If approved, family offices and funds from around the world will have access to a regulated digital asset financial product to invest their wealth in a truly borderless and international asset class. I feel this is one of the most significant developments in the digital asset industry in the past decade,” Gupta said. 

However, “It’s also crucial to recognize that the price of Bitcoin is subject to extreme volatility and rapid changes regardless of individual news events,” pointed out Rania Gule, market analyst at multi-asset brokerage firm 

“The impact of this news depends on various factors, including general economic conditions, developments in regulations related to cryptocurrency markets, and technical factors within the market,” Gule added.

Among the top 10 cryptos, Toncoin, the native token of proof-of-stake blockchain TON, led gains on Wednesday. It rose 15.13% in the past 24 hours to US$1.72 and posted a weekly gain of 23.74%. The Telegram messaging application introduced the TON blockchain in 2018 but severed ties in 2020 due to increasing regulatory pressure from the SEC. The blockchain said it has seen a 102% increase in developer involvement within the last year. 

In July, Telegram also launched its Wallet Pay service, which allows users to pay merchants directly on the app using crypto. The service supports Toncoin, Bitcoin and Tether stablecoin payments.

Memecoin Dogecoin rose 4.12% to US$0.06563 in the past 24 hours, and gained 2.68% in the past seven days. Long-time Dogecoin advocate Elon Musk, the chief of social media platform X (formerly Twitter), had much to cheer after Rhode Island’s state regulators granted X a currency transmitter license, which will allow X to exchange, custody, and transfer digital currencies.  

“The news of Elon Musk’s X obtaining a license to facilitate U.S. crypto payments amplifies the ongoing transformation of the crypto landscape. Endorsements from prominent figures like Musk lend credibility to the sector and hold implications for international markets…The impact is likely to fuel interest and confidence in cryptocurrencies,” said Bowler of BTC Markets.

Total crypto market capitalization rose 4.35% to US$1.09 trillion, while crypto market volume surged 130.25% to US$55.38 billion in the past 24 hours. 

NFT traders cautious after SEC attack 

The indexes are proxy measures of the performance of the global NFT market. They are managed by CryptoSlam, a sister company of Forkast.News under the Forkast.Labs umbrella.

The Forkast 500 NFT index fell 1.34% to 2,197.55 in 24 hours to 7.20 p.m. in Hong Kong, bringing its weekly losses to 4.05%. At the same time, Forkast’s Ethereum, Polygon and Solana indexes posted gains.

“NFT traders are starting to factor in the SEC’s lawsuit against Impact Theory, reflected in a steep decline in the Forkats 500 NFT Index,” said Yehudah Petscher, NFT strategist for Forkast Labs.

The SEC charged Los Angeles-based media company Impact Theory on Monday with offering and selling its “Founder’s Keys” NFTs as unregistered securities. This marked the first direct enforcement action by the regulator against an NFT project.

Impact Theory co-founder Tom Bilyeu tweeted to confirm that the company has reached a settlement with the SEC. 

“Although we are disappointed that the SEC has chosen to broadly question the exciting technical innovations that make digital assets possible through the lens of the securities laws, we remain optimistic for the future of this industry in the United States, and hope we remain the global home of innovation,” Bilyeu said. 

Meanwhile, total NFT sales volume rose 8.04% to US$11.36 million, while the number of NFT buyers declined 4.08% to 51,362 in the past 24 hours, according to CryptoSlam data

Among blockchains, Ethereum topped rankings as its sales volume grew 10.34% to US$6.28 million, followed by ImmutableX. 

Among collections, ImmutableX-based Gods Unchained topped rankings by sales volume, rising 63.36% to US$979,148. This was followed by Ethereum-based Bored Ape Yacht Club whose sales volume gained 61% to US$836,849.

European bourses in the red on inflation fears; Asian equities, U.S. stock futures gain 

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Image: Envato Elements

Most Asian markets rose at the close of trading hours on Wednesday. China’s Shanghai Composite and Shenzhen Component Index, Japan’s Nikkei 225, and South Korea’s Kospi all closed the day in the green. Hong Kong’s Hang Seng index dropped. 

China has been announcing measures to support its property sector as well as to boost investor confidence and capital markets. The world’s second largest economy halved stamp duty on stock transactions to 0.05%, and lowered margin requirements for buying securities to 80% from 100%. 

“Given still-weak house price momentum and continued distress affecting confidence, we may still not be able to see a property recovery soon,” said Michelle Lam, Greater China economist at Societe Generale, according to a Bloomberg report

U.S. stock futures strengthened as of 8.15 p.m. in Hong Kong on Wednesday. The Dow Jones Industrial Average futures, the S&P 500 futures, and the Nasdaq 100 Futures were all in the green. 

The U.S. saw the Labor Statistics Bureau’s Job Openings and Labor Turnover Survey (JOLTS) for July fall to 8.82 million, from 9.17 million in June. This is the lowest monthly level since 2021, which points towards a gradual cooling of labor demand and a fall in job openings.  

“The Fed is concerned that rapid wage growth might stoke inflationary pressures in 2024, but wage growth is likely to slow in coming months with workers seeing fewer opportunities to raise wages by switching jobs,” said Bill Adams, chief economist at Comerica Bank, according to a CNBC report.

The U.S. central bank last raised its interest rate to between 5.25% and 5.50% in July, the highest level in 22 years. 

European bourses dropped on Wednesday, with the benchmark STOXX 600 and Germany’s DAX 40 falling during afternoon trading hours in Europe. Data shows inflation increasing across Germany and Spain, which means the European Central Bank may raise interest rates further to tackle stubborn inflation. 

(Updates with equities section.)