From mid-March to mid-October, Bitcoin traded mostly sideways in a price range between around $US25,000 and $US30,000. However, Bitcoin broke out to the upside on October 23, ultimately trading as high as $US35,198 on the strength of ETF optimism and flight-to-safety buying amid an escalating conflict in the Middle East.

Ethereum prices also rallied in October, and Ethereum bulls are assuming a spot Bitcoin ETF approval would mean a spot Ethereum ETF is right around the corner. ETH prices traded up to $US1,798 to finish the month but remained well below its 2023 highs of around $US2,137 back in April.

Bitcoin and Ethereum were on track to finish the month up 27% and 8%, respectively. Bitcoin prices are now up 107% year-to-date in 2023, while Ethereum prices are up 49%. Whether Ethereum continues to lag or if it makes a move to catch up to Bitcoin is yet to be seen.

Investors have been anticipating the launch of a Bitcoin spot ETF for years, but the push for the first crypto spot ETF has gained serious momentum in the past three months. The SEC has approved several Bitcoin futures ETFs in recent years, but it has repeatedly denied applications for a spot ETF that would invest in cryptocurrency directly. In its rejections, the SEC has cited concerns over investor safety and the potential for crypto market manipulation.

Analysts at Bloomberg Intelligence now estimate there is a 90% chance of an SEC spot Bitcoin ETF approval by January 10, 2024. That’s the expiration date for the SEC’s window for ruling on a spot bitcoin ETF proposal by Ark Invest and 21Shares.

On October 23, market clearing and settlement service provider Depository Trust and Clearing Corporation began listing BlackRock’s proposed iShares Bitcoin Trust (IBTC) on its list of ETFs. Investors took that as a sign that SEC approval could be imminent. In addition to BlackRock, several other heavy-hitting Wall Street firms are also awaiting SEC rulings on their own Bitcoin spot ETFs, including VanEck, WisdomTree, Fidelity, Bitwise and Invesco.

On October 19, Grayscale filed a form S-3 with the SEC to register its Bitcoin trust as an investment product, the first step in converting it to a spot ETF. One week earlier, the SEC had said it did not plan to appeal August’s DC Circuit Court of Appeals ruling, which overturned the SEC’s rejection of Grayscale’s proposal to convert GBTC into a spot ETF.

Sebastian Heine, chief risk and compliance officer at Northstake, says approving a Bitcoin spot ETF could unlock major pent-up demand for crypto.

“The approval of the first Bitcoin spot ETF by the SEC would mark a watershed moment for the digital asset industry. This wouldn’t merely be a regulatory nod, it would be a clear acknowledgement of the evolving role of digital assets in modern finance,” Heine says.

While crypto investors cheered the possibility of a Bitcoin spot ETF in October, a reminder of the dark side of the crypto industry was also front and centre.

On October 25, disgraced FTX founder and former CEO Sam Bankman-Fried’s defence team announced that SBF would take the stand to defend himself, a rare move in a criminal trial.

Throughout the month of October, a long list of witnesses provided damning testimony describing Bankman-Fried as a cocky, image-obsessed crypto influencer who would tweak FTX’s balance sheet to preserve his public reputation.

The prosecution has already called witnesses such as FTX investor Marc-Antoine Julliard, Bankman-Fried’s college roommate Adam Yedidia and ex-girlfriend and business partner Caroline Ellison to testify against Bankman-Fried.

Bankman-Fried’s trial began on October 3 in a Manhattan federal court. He faced seven criminal charges tied to allegedly lying to investors and lenders and stealing billions of dollars before the high-profile collapse of his cryptocurrency exchange during 2022’s crypto winter.

He was eventually found guilty of all charges, after a 12-person jury took fewer than four hours to deliberate. He will be sentenced on March 28.

Nigel Green, founder and CEO of deVere Group, says Bankman-Fried is emblematic of the type of bad actors who exacerbated 2022’s crypto winter, but the SBF trial may have ultimately boosted crypto investor confidence moving forward.

“A meticulously conducted trial resulting in appropriate repercussions will inevitably boost trust among investors in the asset class,” Green says.

“This trust would further attract investors, especially institutional investors, who bring huge capital, expertise and influence, thereby contributing to crypto’s broader acceptance.”

In addition to its courtroom loss to Grayscale, the SEC also announced in October that it was dropping its civil lawsuits against two cryptocurrency executives charged with assisting in illegal sales of Ripple Labs cryptocurrency XRP. The SEC appears to be moving past its legal battle with Ripple and focusing on ongoing lawsuits against cryptocurrency exchanges Coinbase (COIN) and Binance.

The Wall Street Journal reported in October that digital currency wallets linked to militant groups Hamas, Palestinian Islamic Jihad and Hezbollah received at least $US134 million in cryptocurrency between August 2021 and June of 2023 ahead of Hamas’ October attack on Israel that killed more than 1,000 civilians.

Hamas and its ally organisations have been labelled foreign terrorist groups by the US government and have limited access to the traditional banking system. For these “debanked” organisations physical cash and cryptocurrency have become an essential way to launder money and receive pseudo-anonymous funding.

Following the attack on Israel, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) proposed a new set of regulations that would increase transparency for cryptocurrency “mixers,” software tools that allow users to hide the owner’s identity or source of digital assets.

The new rules would require US financial institutions to collect data on international mixer transactions, such as personal and transactional details, and report certain information to regulators.

Anthony Georgiades, co-founder of Pastel Network, says the regulatory landscape will remain the key issue in the crypto world heading into the end of 2023.

“The regulatory landscape is not just a backdrop but a critical player in shaping the industry’s trajectory,” Georgiades says.

“The recent uptick in Bitcoin’s value and the broader market sentiment are encouraging, but they also underscore the need for a more robust and transparent regulatory framework.”

In Australia, the Federal Government is forging ahead with crypto regulation, and, in one of its discussion papers, has proposed compelling exchanges operating in Australia to obtain an Australian Financial Services License (AFSL).

This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency or CFDs as an investment class.  Cryptocurrency is unregulated in Australia and your capital is at risk. Trading in contracts for difference (CFDs) is riskier than conventional share trading, not suitable for the majority of investors, and includes the potential for partial or total loss of capital. You should always consider whether you can afford to lose your money before deciding to trade in CFDs or cryptocurrency, and seek advice from an authorised financial advisor.