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(Kitco News) - The prospect of a spot Bitcoin (BTC) exchange-traded fund (ETF) being approved within the next few months has led to a resurgence of activity across the cryptocurrency ecosystem as investors look to position themselves ahead of the next major crypto market bull run.

According to the latest Data & Insights newsletter from cryptocurrency data provider The Block, the downtrend in spot trading volumes has reversed to hit the highest level since March amid a spike in activity from retail traders.

“The 7-day moving average of daily spot volume across centralized exchanges climbed to $24.12 billion on October 26th, the highest it's been since March and more than double what the average was at the start of the month ($11.02 billion),” analysts at The Block said. “It is the first time we have seen such strong upward momentum in volumes, as 2023 has so far been marred by volumes falling off to the lowest they’ve been since 2020 (the average slipped below $10 billion a handful of times in September).”

Daily exchange volume. Source: TheBlock

The analysts noted that the average trading volume has been rising for 12 days in a row, which is the longest positive period since August 2020.

“A lot of this rise has been driven by Bitcoin trading, as we see the 7-day moving average of spot volume for BTC pairs reaching $9.58 billion on October 26th, also the highest since March, consistent with the broader trend,” they said. “Ether (ETH) spot volume has only risen to $3.05 billion, the highest it's been since May. Compared to October 1st, Bitcoin’s spot volumes are up 2.7 times higher compared to just 2 times higher for ether, which is still quite high.”

The Block highlighted that the upswing for the crypto market started with a false report from Cointelegraph on Oct. 16 that BlackRock’s spot BTC ETF had been approved, with Bitcoin’s price spiking 5% and then falling back down when the rumor was debunked.

“One thing that incident proved was that the actual ETF approval was not priced in,” the analysts said. “While a spot Bitcoin ETF seems all but certain these days, especially after the SEC did not appeal in the Grayscale case and the court confirmed the ruling last week, it seemed that the market still had a visceral reaction to an actual approval.”

The analysts said last week’s move higher “falls in line with a general ‘we’re so back’ sentiment that seems to have kicked off in the crypto market” following the false spot BTC ETF report. “If the market [behaves] like that again when an actual approval comes through (and not face the drawback from the rumor turning out to be false), then it does make sense that people would be trying to pile in ahead of that,” they said.

Aside from the momentum generated by a possible spot BTC ETF, “Another argument for Bitcoin’s recent success is that it is gaining traction as a safe-haven asset,” they said. “Recent macro conditions have many people looking to mitigate risk in their portfolios, which for a while seemed to be impacting Bitcoin, as well as many more traditional asset classes like stocks and bonds.”

The report said the rise in geopolitical tensions has combined with high inflation and partisan politics in the U.S. to make investors see Bitcoin as a hedge against uncertainty and the loss of value.

“We can see this trend more evidently looking at the 30-day correlation between Bitcoin and the S&P 500, Nasdaq Composite, and gold,” they said.

BTC vs. gold vs. Nasdaq vs. S&P. Source: TheBlock

“In late August, Bitcoin was holding a strong positive correlation to all three assets as all markets seemed to face a steep sell-off, with China’s real estate market showing signs of trouble and the U.S. bracing for what seemed to be a highly probable shutdown,” the analysts wrote. “But now, Bitcoin is showing a 0.65 30-day correlation to gold, indicating the two are seeing similar price movements. On the other hand, Bitcoin’s correlation to the S&P 500 was -0.7 at close on Friday (and -0.65 for the Nasdaq Composite), showing that Bitcoin is moving in opposition to equities.”

They said that Bitcoin moving in line with gold while stocks struggle is a sign that Bitcoin is gaining broader acceptance in the global market.

“Gold is the de facto safe haven asset in times of conflict due to its reliable store of value,” they said. “So gold, along with Bitcoin, has been rising in recent weeks. Stocks, which are more tied to the macro environments they exist in, have begun to look more risky and, in turn, are being sold off.”

They said that while it's likely there will “come a time again when Bitcoin is heavily correlated to equities,” in times of crisis, “Bitcoin is looking like a better asset to speculate on than a stock index.”

The analysts cited page views on Bitcoin’s Wikipedia page as further evidence that interest in the top crypto is rising.

“There were 13,490 views of Bitcoin’s Wikipedia page on October 24th, and a still sizable 11,420 views the next day,” they said. “The number of page views to the Wikipedia page has not exceeded 10,000 since November 2022. The number of views on the 24th is the highest number since June 2022, over a year ago.”

Page views of Bitcoin’s Wikipedia page. Source: TheBlock

They said that while “the number is still relatively low to the broader interest in Bitcoin's Wikipedia page,” with the views peaking at 344,690 back in Dec. 2017, “It is worth noting that back in 2017, there were not as many resources about Bitcoin, which contributed to how many views the Wikipedia page was getting.”

“That being said, a surge in Wikipedia views is indicative of more interest coming from more casual investors,” they said. “While it doesn’t mean that a slew of retail traders are ready to start jumping back into crypto again after the fallouts of 2022, it does seem like more people are at least thinking about it.”

The analysts also noted that page views dropped back down to 8,000 on Oct. 26, “so the newfound excitement was not really sustained, but 8,000 views is still almost double the 4,300 views on October 8.”

Another sign of the rising interest was seen in the Bitcoin derivatives market.

Aggregated open interest of Bitcoin Options. Source: TheBlock

“The open interest across Bitcoin options jumped up to $15.37 billion on October 27th, the highest the total has ever been across exchanges,” they said. “Monthly bitcoin options volumes are also looking to be the highest ever across exchanges.”

“Part of the rapid rise in open interest is due to the price of Bitcoin rising. When dealing with contracts denominated in Bitcoin, when its price rises, so will the notional value of volumes and open interest,” they said. “But part of the rise is just new market participation. The open interest on Deribit in terms of BTC reached 403.67k on October 27th, the second-highest peak ever, falling just slightly behind a surge in open interest in March.”