A long-awaited Bitcoin exchange-traded fund (ETF) may soon become reality – but not without some speed bumps along the way. In an interview this week, ARK Invest CEO, Cathie Wood, expressed cautious optimism that the SEC is moving towards approving a spot Bitcoin ETF, citing the regulator’s shift to asking more extensive questions of ETF applicants.
“Something has changed,” she said in an interview.
However, the path is not yet totally clear. Wood points to potential complications from Grayscale’s plans to convert its popular Grayscale Bitcoin Trust (GBTC) into an ETF format. If the SEC denies Grayscale’s application, the firm may sue the regulator which could stall approvals for other Bitcoin ETF applications.
Still, Wood believes the chances for eventual approval are higher than ever. The SEC engaging more deeply with ETF applicants indicates they are seriously considering the proposals. Amendment filings from ETF applicants like GlobalX also show momentum toward approval.
Cathie Wood is also considering the possibility that an approval is already priced in. In an interview with PRO Talks on Tuesday, November 16, 2023, she said: “When you get a lot of anticipatory investing like this sometimes you don’t get [a significant price upswing] right away. There could just be profit-taking especially if it settles down a bit.”
Earlier this week, Wood sold $6M of shares in Grayscale Bitcoin Trust (GBTC), cashing in on the recent rally in Bitcoin’s price which is up 28% over the last 30 days.
The launch of even one SEC-approved spot Bitcoin ETF would likely open the floodgates of mainstream investment into crypto. Major players like BlackRock, Valkyrie, and ARK have spot Bitcoin ETF applications pending – these would compete directly with Grayscale. Crypto prices could get a boost from the influx of new capital.
However, not everyone is convinced by the transformative potential of a spot Bitcoin ETF. Analysts at JPMorgan believe existing capital will simply shift into new ETFs rather than attracting significant fresh investments. They also caution that hopes for a more lenient regulatory climate are unrealistic given recent market troubles.
With major actions still pending against players like Binance and Coinbase, the outlook remains challenging. JPMorgan also contends the upcoming Bitcoin halving is already priced in. As such, they remain cautious on a big market bounce.
American stockbroker, Peter Schiff, has even warned of a crash following an ETF approval.
While approval could come before year end, the timing is still uncertain. Grayscale’s potential lawsuit and conversion process could delay the SEC greenlighting other Bitcoin ETF applications. Still, continued engagement between the SEC and applicants is a positive sign.
When launch does come, a spot Bitcoin ETF would validate crypto in mainstream finance. This could bolster long-term adoption of digital assets. Of course, an ETF would also open crypto to new speculation and volatility. But for now, investors remain excited at the prospect that the crypto ETF barrier may soon be broken.