Bitcoin faced a 3% drop on Friday in New York after the Securities and Exchange Commission (SEC) announced postponing decisions on spot Bitcoin price-based exchange-traded funds (ETF) applications till mid-October, negating the week's gains prompted by Grayscale's court victory.

This setback erased the cryptocurrency's gains for the week, fueled by a court victory for Grayscale, a firm aspiring to convert a Bitcoin trust to an exchange-traded format.

As a result, Bitcoin marked its second consecutive losing month, shedding over 10% over the past four weeks. The decline coincided with sell-offs in stocks and bonds, and on Friday, the largest cryptocurrency in the world traded around $25,800, facing a decline of more than 2.5% as losses extended into the new month.

Fred Pye, the CEO of 3iQ, a Canadian digital asset investment firm, remarked, "The SEC's decision to delay consideration of broader ETF applications suggests that nothing has truly changed."

The broader cryptocurrency market also contracted by 3% within 24 hours, reaching a total market capitalization of $1.08 trillion. Ether, the second-largest cryptocurrency, experienced a 3.2% fall, trading at $1,611.

Interestingly, Bitcoin gained 6% on Tuesday, adding $50 billion to its market capitalization after a federal appeals court deemed the SEC rejected Grayscale's request to convert its Bitcoin trust into an ETF as "arbitrary and capricious." This price rally boosted the crypto market's value to $1.15 trillion.

The Grayscale Bitcoin Trust has consistently traded at a discount to the net asset value of the cryptocurrency it held since early 2021. Conversion to an ETF would effectively eliminate most of this discrepancy. Although the discount widened to 20.6% after Tuesday's court decision, it remained significantly tighter than the nearly 50% recorded late last year.

It is worth mentioning that the SEC has historically not permitted ETFs based on spot Bitcoin prices, citing the market's volatility as a risk for retail investors. However, funds based on futures with surveillance safeguards are allowed. Yet, since futures prices are ultimately derived from the spot market, a three-judge appeals court panel regarded the SEC's stance as irrational.

The market received a boost with the Grayscale decision on Tuesday, but the subsequent SEC timeline announcement tempered enthusiasm among investors.

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