Bitcoin Breaches $85,000 as SEC Shifts Stance on Crypto Custody

Bitcoin is charging toward its highest valuation since January as bulls dismantle major resistance, even as cooling U.S. labor data complicates the macroeconomic picture. Today’s roundup also tracks a pivotal shift in SEC custody policy, the Ethereum Foundation’s latest privacy-focused AI tool, and a high-stakes legal battle brewing between traditional banking groups and federal regulators.

Bitcoin Clears $85,000 Hurdle as Momentum Builds

Bitcoin has successfully breached the $85,000 liquidity barrier, pushing the asset toward levels not seen since the start of the year. Glassnode data shows that clearing these heavy sell orders provided the fuel for the current rally, with prices now eyeing the $87,000 threshold. This surge persists despite a cooling U.S. labor market, which recorded only 29,000 new jobs for September. Investors are looking past the weaker economic prints, maintaining a bullish posture that keeps the crypto market outperforming traditional asset classes.

Market sentiment remains robust, reflected in the latest BD Pulse reading of 56.8/100. The BD Extreme Index currently sits at +0.60σ, signaling that the market is operating at a notable deviation from its annual mean. With a perpetual long/short account ratio of 1.20, traders are leaning into the trend, with 54.5% of accounts positioned long. The market’s ability to absorb the $85,000 sell wall suggests that institutional demand is outweighing the macroeconomic headwinds presented by the disappointing jobs report.

SEC Signals Pivot on Crypto Custody Rules

The Securities and Exchange Commission has unveiled a new regulatory framework that could fundamentally change how investment advisers and funds manage digital assets. The proposal establishes specific conditions under which these entities may legally self-custody their crypto holdings, a significant departure from the agency’s previous, more restrictive oversight. The framework also explicitly recognizes state-chartered trust companies as qualified custodians, providing a clearer path for institutional participation.

This policy shift arrives as Commissioner Hester Peirce, a vocal proponent of regulatory clarity, nears the end of her tenure. By formalizing the role of state-chartered trusts and outlining self-custody requirements, the SEC is addressing friction points that have historically kept traditional financial advisers on the sidelines. The move functions as a pragmatic adjustment to the reality of institutional crypto adoption, aiming to provide a structured environment for asset protection without stifling the operational flexibility required by modern investment funds.

Ethereum Foundation Debuts Privacy-Centric zkAPI

The Ethereum Foundation has introduced zkAPI, a privacy-focused tool designed to decouple user identity from artificial intelligence interactions. By leveraging zero-knowledge proofs, the system enables individuals to fund and authorize AI model usage without exposing their personal data or linking their identity to specific queries. Users deposit assets into a secure Ethereum vault, which handles payments to API providers while ensuring the underlying transaction details remain anonymous.

This integration bridges the gap between privacy-preserving technology and the rapidly expanding AI sector. By removing the need for identity verification at the point of service, the Foundation is positioning Ethereum as a foundational layer for decentralized, private AI infrastructure. The development addresses concerns regarding data harvesting in the AI industry, offering a model where users can participate in the digital economy without sacrificing their anonymity. As AI models become more deeply embedded in daily workflows, the ability to interact with these systems through a trustless, cryptographic layer could become a critical feature for the broader Ethereum ecosystem.

Evernorth Secures Shareholder Green Light for Nasdaq Listing

Shareholders of Armada Acquisition Corp. II have officially approved a $1 billion merger with Evernorth, a firm specializing in the management of a massive XRP treasury. The deal secures control over approximately 473 million XRP tokens, marking a significant step toward the company’s goal of a public listing on the Nasdaq. This merger represents a milestone for institutional-grade crypto treasury management, bringing a substantial digital asset holding directly into the public equity markets.

The approval clears the final hurdle for the entity to move forward with its public debut. By transitioning to a Nasdaq-listed entity, Evernorth is expected to provide investors with a regulated vehicle to gain exposure to XRP treasury management. This development underscores the appetite for public market vehicles that offer direct or proxy access to digital assets, moving beyond the traditional exchange-traded fund structure to encompass corporate entities with significant crypto-native balance sheets.

Banking Group Challenges OCC Crypto Charters

The Independent Community Bankers of America has initiated a lawsuit against the Office of the Comptroller of the Currency, targeting the regulator’s authority to issue crypto trust charters. The banking group argues that the OCC has exceeded its statutory mandate by granting these specialized charters to firms focused on digital asset custody. The litigation centers on the interpretation of federal banking laws, specifically questioning whether the OCC has the legal standing to extend traditional banking charters to entities operating primarily in the crypto sector.

This legal challenge highlights the persistent friction between legacy financial institutions and the evolving regulatory landscape for digital assets. The banking group contends that the current oversight approach creates an uneven playing field and potentially introduces systemic risks that the OCC is not equipped to manage. As the case proceeds, it will serve as a litmus test for the extent of federal regulatory power in the crypto space. The outcome could force a reevaluation of how digital asset custodians are chartered and supervised at the federal level, impacting the expansion plans of crypto-native firms currently operating under these specialized trust designations.

What to Watch Next

The intersection of institutional custody rules and ongoing legal challenges against the OCC will likely dictate the pace of traditional finance integration through the end of the week. Traders should monitor whether Bitcoin can maintain its current momentum above $85,000 as the market digests the implications of the SEC’s new framework. These regulatory developments, combined with the shifting landscape for crypto-native public companies, remain the primary drivers for institutional sentiment heading into the weekend.

Sources: The Block, The Block, The Block, The Block, CoinDesk

Disclaimer: This content is for informational purposes only and does not constitute financial advice. Cryptocurrency markets are highly volatile and unpredictable. All trading decisions should be made based on your own research and risk tolerance. Block Digest is not responsible for any financial losses incurred as a result of acting on this content.