The upcoming Bitcoin ETF approval in the United States is akin to an 800-pound gorilla in the room, silently waiting to make a significant impact. Most people, including those well-versed in the crypto space, seem oblivious to this impending development, given the years of rejections from the Securities and Exchange Commission (SEC) and the ongoing bearish market sentiment.
Since 2013, when the first Bitcoin ETF application was submitted to the SEC and subsequently rejected, over 30 proposals have been denied in the past decade. Currently, there are ten active applications from major financial institutions. However, a cursory glance might suggest that these applications will meet the same fate as their predecessors, but such an assumption would be overly simplistic.
Recent developments in the last three months have dramatically improved the odds of approval. Two key factors need consideration to understand how a spot ETF might rejuvenate Bitcoin and lift the crypto market from its bearish state.
Development 1: BlackRock’s ETF Bid Things gained momentum on June 15th when BlackRock surprised everyone by submitting a Bitcoin ETF application. BlackRock CEO Larry Fink, who previously criticized Bitcoin as an “index of money laundering” in 2017, has now expressed favorable sentiments about it. His shift in stance is significant, especially considering that BlackRock boasts a nearly flawless record of ETF application approvals, with only one out of 576 applications being rejected.
Several other prominent institutions, including Fidelity and Ark Invest, have also filed applications, with similar timelines for review. While the SEC can opt for delays during the review process, the caliber of these institutions and their optimism strongly suggest approval is on the horizon.
Development 2: Grayscale’s Court Victory Another pivotal development was the August 29th federal court ruling that found the SEC wrong in denying Grayscale Investments’ application for a spot Bitcoin ETF. Grayscale had previously sought to convert its Grayscale Bitcoin Trust (GBTC) into an ETF, but the SEC rejected the application. Grayscale’s successful lawsuit argued that the SEC’s decision was arbitrary and capricious. The court ordered the SEC to reevaluate Grayscale’s application, effectively overturning the initial rejection.
Although this ruling doesn’t guarantee automatic approval, it significantly improves the likelihood of approval in the near future. If the SEC had strong reasons for rejection, one would expect those to have been presented initially.
Odds of Approval Despite the recent delay of all ETF applications by the SEC, the path to a spot ETF approval has become clearer, particularly after Grayscale’s court victory. JPMorgan analysts and former SEC Chair Jay Clayton both suggest that approval is inevitable. It’s reasonable to anticipate that the SEC might approve multiple applications simultaneously, considering their structural similarities.
According to Eric Balchunas, a senior ETF analyst for Bloomberg Intelligence, there’s a 75% chance of a spot Bitcoin ETF gaining SEC approval this year, increasing to 95% by the end of 2024. If approval becomes inevitable, what can we expect in terms of market responses?
Post-ETF Crypto Markets While Bitcoin ETFs already exist in several other countries, approval in the U.S., the heart of global financial markets, would be a monumental event. An ETF would channel fresh investments into Bitcoin, providing a more trusted and straightforward avenue for mainstream investors to gain exposure to crypto. Unlike the current process of dealing with crypto exchanges and wallets, an ETF allows investors to buy shares without navigating complex KYC procedures and transfers.
Institutions applying for a Bitcoin ETF understand these barriers and recognize the potential to bring a significant segment of the population into the crypto fold comfortably.
Spot ETFs, as opposed to futures ETFs, could have a particularly positive impact on crypto markets. Spot ETFs require institutions to back them with real Bitcoin, which directly affects the asset’s price. In contrast, futures-based ETFs operate more like side bets, not influencing the underlying asset’s price.
The influx of new funds from spot ETFs could rejuvenate the crypto industry, which has faced challenges in 2022. The news of ETF approval itself would likely trigger a surge in buying, injecting volatility and vitality into the markets that have been relatively subdued recently.
In the short to medium term, a feedback loop could emerge where Bitcoin’s price increases on ETF approval news, attracting investors seeking exposure to Bitcoin. These investors, in turn, would purchase ETF shares, further boosting Bitcoin prices.
In the long term, institutions like BlackRock are likely to encourage clients to diversify their portfolios with Bitcoin, leading to sustained demand and potential price appreciation. Similar to how gold appreciated following the approval of the Gold ETF in 2004, Bitcoin could embark on a bullish cycle after the ETF’s approval.
In conclusion, the Bitcoin ETF’s impending approval is a game-changer that the world is not yet fully aware of. However, as this development unfolds, it is likely to grab the attention of both the crypto and traditional financial worlds, potentially reshaping the future of Bitcoin and the broader crypto market.
Curious about Bitcoin?
How about mining this new and asymmetric asset?
Find out how it works.
Book your edge now!
www.rollmanmining.com
