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Seven Bitcoin ETF Decisions Due By Sept. 4 — 75% Chance of Successful Launch Says Analyst

Published August 31, 2023 1:57 PM
Teuta Franjkovic
Published August 31, 2023 1:57 PM
Key Takeaways
  • US SEC reviews numerous Bitcoin ETF applications.
  • It eases entry for traditional investors.
  • With a Bitcoin ETF, investors can access BTC without direct ownership.
  • They may skip storage and security concerns.
  • Regulatory concerns about market manipulation and volatility persist.

As the September 4 deadline approaches, in the wake of its defeat to Grayscale Investments in a U.S. federal appeals court, the US Securities and Exchange Commission (SEC) is up against its first deadlines to decide on seven spot Bitcoin exchange-traded fund (ETF) applications.

Before the Labor Day holiday, the US Securities and Exchange Commission will respond to filings  from Bitwise, BlackRock, VanEck, WisdomTree, and Invesco. Regulators may deny, grant, or postpone them.

Since Bitwise’s application is due on Friday, September 1, 2023, and the others are due the following day, it seems likely that the SEC will make a decision before the weekend.

Analysts and business observers believe the SEC will postpone its judgment once more. The authority had already given 21Shares a delay for its spot-Bitcoin proposal with ARK Investment Management in early August and had previously rejected  other applications over the previous ten years.

“We can expect to see more delays from the SEC,” said  Roxanna Islam, associate director of research and head of sector and industry research at VettaFi. “Especially after they already delayed their decision earlier this month on ARK’s spot-Bitcoin ETF filing.

“We must wait for the SEC’s ruling on Grayscale’s case before proceeding because otherwise, they might allow filings for spot-Bitcoin ETFs before those for ether-futures ETFs.

CCN reached out to Bitwise, BlackRock, VanEck, WisdomTree, and Invesco for commentary but did not receive a reply at the time of publishing

Spot BTC ETF application list
List of all spot Bitcoin ETF applications | Credit: Bloomberg Intelligence

Analyst Eric Balchunas said it won’t be surprising if the SEC decides to delay. According to hima and another analyst, James Seyffart, up to 75% of spot bitcoin ETFs may be launched this year, and 95% by end of 2024.

“While we factored Grayscale win into our prev 65% odds, the unanimity & decisiveness of ruling was beyond expectations and leaves SEC with very little wiggle room,” he commented .

 

ARK 21Shares’ CEO Optimistic

ARK 21Shares’ Bitcoin ETF leads the way, a product of Ark Investment Management and 21Shares. Their project is a never-ending saga as an application approval is pending since 2021.

After experiencing prior failures from the SEC  because of worries about market manipulation and insufficient investor safeguards, this year marked the beginning of their renewed push.

Cathie Wood, CEO of Ark, is optimistic. She imagines the SEC approving several ETFs at once, with success being largely dependent on marketing skill and effective communication.

“Because most of these essentially will be the same, it will come down to marketing and communicating the message. We are trying to get the word out there that our research is deep, and we have been doing it since 2015,” Wood said .

However, Scott Farnin, the Better Markets’ legal counsel, expressed  grave doubts. Farnin argued that the proposals’ surveillance-sharing agreements were insufficient prior to the SEC’s recent judgment.

As a result of its inflated trading volumes, concentration, and reliance on a small number of people and organizations, Farnin emphasized that Bitcoin is vulnerable to manipulation. He said that because of these characteristics, the proposed spot Bitcoin-based ETF is particularly vulnerable to abuse, putting investors at undue risk.

“The principal beneficiaries of the crypto craze are the criminals who use it to facilitate ransomware, money laundering, and illegal conduct of all types. It is within this context that the SEC must evaluate the latest wave of Bitcoin ETF filings this month,” Farnin stated .

He also urged the SEC to take into account Bitcoin’s inherent weaknesses and to continue rejecting spot Bitcoin-based ETFs that do not adhere to legal criteria.

Grayscale Files Lawsuit in Pursuit of Approval

Grayscale Investments’ proposal to turn its Bitcoin trust into an ETF was rejected by the SEC last year on the grounds that the cryptocurrency markets are too vulnerable to fraud and manipulation. Because the SEC had already approved ETFs  that follow Bitcoin futures, Grayscale filed a lawsuit seeking the DC Circuit Court of Appeals to overturn the decision, which the business described as being arbitrary and discriminatory.

For years, there has been a strong desire for a spot-Bitcoin ETF among members of the crypto community and outside supporters. They contend that it would not only help bring digital assets closer to traditional financial markets but would also make investment in Bitcoin more accessible to regular individuals.

Regulators have continuously refused to authorize such a product, however, citing fraud and manipulation as some of the reasons. Tyler and Cameron Winklevoss, who established Gemini, were the first company to file for a physically backed Bitcoin ETF in 2013. Similar to numerous other attempts by other issuers, SEC turned it down.

Elliott Stein, senior litigation analyst at Bloomberg Intelligence, predicted  that the SEC would put off making decisions “to the extent that it can” until a judgement in Grayscale was made by the court. He calculates that Grayscale has a 70% chance of succeeding in getting the SEC’s rejection order overturned.

BlackRock’s Entry Sparks Optimism for Bitcoin ETF Approval

When it filed in June, BlackRock Inc. put the race for a spot-Bitcoin fund into high gear. As the asset manager’s nearly flawless track record of launching ETFs, some analysts hypothesized that this time, the applications — from BlackRock and others — could have a higher likelihood of being accepted.

And the current excitement over the prospect of a fund has given businesses the confidence to experiment with more unconventional vehicles in addition to Bitcoin ETFs. Several businesses have submitted papers for funds that combine Bitcoin and Ethereum futures and/or Ether futures.

According to some reports, the SEC will  approve the trading of Ether-futures funds in October, which many see as a victory for the sector.

After reaching around $31,000 in mid-July, the price of Bitcoin  was standing at around $27,178 on Thursday. In late 2021, the value of the biggest digital asset reached an all-time high of about $69,000.

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