By the end of 2023, the Bitcoin ETF will be approved in the US. The general public has no idea that this is about to happen. Even crypto natives, spooked by depressed markets and rejected by the Securities and Exchange Commission for a decade, are rebuking the current state of affairs.
Since 2013, when the first application was submitted to the SEC and later rejected, Bitcoin exchange-traded funds have become very popular. Over the past 10 years, the SEC has rejected several dozen proposals each, including more than 30 starting in 2021. There are currently 10 active applications from major institutions. An unsuspecting viewer might expect more of the same rejection, but that’s naïve.
Two concrete developments in the past three months have significantly improved approval prospects. Let’s take a look at these developments and wonder if a spot ETF could revive Bitcoin and take the crypto out of its bear market.
Development 1: BlackrockETF auction
Momentum began on June 15 this year when BlackRock made waves by unexpectedly filing a Bitcoin ETF application.
BlackRock has CEO Larry Fink. They spoke well Since then about Bitcoin. Bitcoin “has a value that differs from other asset classes, but more importantly, it’s more global than any other currency,” Fink said. The change in tune is as impressive as ever. He condemned Bitcoin. In 2017, as “Money Fraud Index”.
BlackRock’s track record for ETF application approvals isn’t great. The asset management giant submitted 576 applications and all but one were approved. Are the Bitcoin ETF tea leaves fixed, and has BlackRock taken note? BlackRock’s 99.8% approval rate suggests.
Several other high-profile institutions, including Fidelity and Ark Invest, followed suit with pending applications. Their registration date and decision time are mostly the same. During the review process, there are four time limits within which the Commission may choose to delay and further review.
Whether the SEC’s decision came early or not by the deadline, the level of institutions currently in the process and their optimism suggests one outcome: approval.
Development 2: GrayCourt victory
A separate but equally significant development in the direction of ETF approval is the August 29 Federal Court decision. The SEC was wrong. Banning Greyscale Investment for Spot Bitcoin ETF. Greyscale has previously applied to convert their Greyscale Bitcoin Trust (GBTC) into an ETF. The SEC denied this application and Grayscale responded by claiming that the decision was improper. The United States Court of Appeals for the District of Columbia sided with Grayscale in its ruling. “Without a coherent explanation, this uncontrolled treatment of products is illegal,” he said. The court ruled that the SEC’s “rejection of the grayscale proposal was arbitrary and capricious.”
The court ordered the SEC to reevaluate Grayscale’s application and effectively reverse the earlier denial.
While the ruling does not equate to automatic approval, approval does strengthen the prospect on the horizon. The SEC should provide strong support for continued rejection. This begs the question: If such support existed, would it not have been included in their initial rejection?
Chances of approval
The SEC recently delayed all ETF filings to September 1, with the initial review period for most applicants on September 2, so the delays were largely expected. The market reacted accordingly, with Bitcoin down 5% to around $25,700 at the time of this writing. Despite the delays, the road to spot ETF approval is clearer after Greyscale’s court win. JPMorgan analysts believe thisAs well as former SEC chairman Jay Clayton Approval is “inevitable,” he said.
It is reasonable to expect that the SEC will approve many or all of them at once. The applications are structured very similarly, and prioritizing applicants may be considered unfair. Kathy Wood, CEO of Arch Invest he told Bloomberg.: “I think if the SEC approves a Bitcoin ETF, it will approve more than one at a time.” Arch Invest is scheduled for January 10, 2024.
Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, believes there is a 75% chance of a Bitcoin ETF getting SEC approval this year. In the year By the end of 2024, the probability has risen to 95%.
If SEC approval is imminent, how do we expect markets to react?
What do crypto markets do, after ETFs?
Bitcoin ETFs are available in the EU, Canada, Brazil and Dubai. But as the United States is the center of the world’s financial markets, including crypto markets, its adoption by the government will undoubtedly be a big event.
An ETF transfers new funds into Bitcoin. Crypto exchanges like Coinbase are the main way to get into crypto today, but the average American has a problem with trust. The KYC (Know Your Customer) procedures and money transfers to buy crypto are also difficult as opposed to simply buying ETF shares. Crypto walletsprivate keys and self-preservation further complicate matters.
Institutions applying for Bitcoin ETFs are well aware of these hurdles. They know that ETFs are an opportunity for a large segment of the public that has remained on the sidelines to comfortably start getting exposure to crypto in their portfolios.
Bitcoin spot ETFs, in contrast Futures ETFs – traded in the US starting in 2021 – could be particularly constructive for crypto markets. Spot ETFs, the type that all current applicants apply for, require the offering institutions to back the ETF with real Bitcoin. This differs from futures ETFs, which allow investors to trade indexed derivatives. In the case of futures ETFs, Bitcoin doesn’t actually change hands. A new buyer of a spot ETF will have a real positive impact on the value of the asset.
Another way to think about futures-oriented ETFs is that two people are betting on how the price of something will change. It’s more of the same than a side bet on what will happen. Their bets have no direct effect on the value of the property they are betting on.
Clients of Bitcoin spot ETFs such as BlackRock or Fidelity must purchase fiduciary Bitcoin to back the fund shares they hold. A Bitcoin spot ETF buys or sells and changes the price of BTC.
The new influx of money into space could give the industry the spark it needs to bounce back from a series of losses in 2022. The volatility will breathe new life into the markets that have been bought throughout this summer. In the year Grayscale’s decision on August 29 resulted in an immediate 6% Bitcoin price increase from US$26,100 to US$27,700. The increase comes on the heels of news of the SEC’s election to delay all advanced filings on Aug. 31, as the initial decision deadline for most filings approaches.
If ETFs are adopted, market gains can be extended over the long term, not just in the short term.
In the short and medium term, flexibility observations may occur:
Bitcoin price rises on news of ETF approval.
Due to the price increase, investors are looking for Bitcoin allocation.
Investors buy shares in the spot ETF, which further increases the value of Bitcoin.
In the long term, we will see BlackRock and other clients shifting part of their portfolios to Bitcoin. Passive investors buy and hold for the long term. As the supply of Bitcoin is limited, the price is bound to go up.
In 2004, the first place Gold has appreciated eight years in a row since its approval. For all the declarations of Bitcoin as “digital gold” it is fitting that the next upward cycle for Bitcoin will begin following the confirmation of the ETF.
The world is not paying attention to Bitcoin at the moment. This will change before the end of the year.