Cryptocurrencies extended gains in Asia trade on Tuesday, with bitcoin rallying to an almost 18-month high on speculation that an exchange-traded bitcoin fund is imminent.

Bitcoin rose more than 6% to US$35 198, its highest since May 2022. It had surged 10% on Monday in its best session for almost a year and its price has doubled in 2023.

Crypto-linked shares such as Coinbase Global or bitcoin owner MicroStrategy rose in after-hours trade. Cryptocurrency ether broke above $1 800.

An exchange-traded fund (ETF) owning bitcoin on behalf of fund investors is seen as a driver of demand because it would allow anyone reluctant to trade crypto markets a means of buying exposure to bitcoin through the stock market.

Investment giant BlackRock is among several firms with pending applications for bitcoin funds in the US and speculation on their likely approval was fuelled by BlacRock’s iShares ETF listing on the website of clearing house DTCC.

Anticipation has also grown after reports this month that the gatekeeper, the US Securities and Exchange Commission, won’t appeal a court ruling it had been wrong to reject an ETF application from Grayscale Investments.

“The value of an asset … any asset basically, is the amount of people using it. So the ETF would make a large audience and increase liquidity,” said Steen Jakobsen, CIO at Saxo.

Bitcoin short-covering

It was not clear when or why the iShares ETF was added to the DTCC list. DTCC and BlackRock did not immediately respond to requests for comment by phone and e-mail. Last week, BlackRock denied an erroneous report that its ETF was approved and sources close to the SEC confirmed the application was still pending.

Data on crypto derivatives analysis site Coinglass showed heavy bitcoin short-covering in the last 24 hours.

The move also comes as concern ripples through the broader markets about the risk of Israel’s war with the Islamist group Hamas becoming a wider regional conflict.

Read: The bulls are back in bitcoin country

Kyle Rodda, analyst at Capital.com said that the conflict and radical Javier Milei emerging as frontrunner for Argentina’s presidency could also have helped demand for bitcoin, which can sometimes behave as a store of wealth during times of crisis. — Tom Westbrook, Rae Wee and Brigid Riley, (c) 2023 Reuters