The cryptocurrency industry is on the edge of its seat this week as the US Securities and Exchange Commission (SEC) is expected to make a decision on whether to approve several Bitcoin exchange-traded funds (ETFs).
Lead Up To The Current Situation
For years, companies have sought approval from the SEC to launch a Bitcoin ETF in the US, which would allow mainstream investors easy access to Bitcoin exposure through their normal brokerage accounts. However, up until now, every single application has been denied or withdrawn.
The main concern cited by the SEC was the potential for fraud and manipulation in the underlying Bitcoin spot markets. However, over the past year, as the crypto industry has matured with increasing adoption and regulation, the SEC has softened its stance.
In mid-2022, the SEC approved several Bitcoin futures ETFs, which are based on derivatives rather than owning the underlying Bitcoins. While welcomed by the industry, these products lack the full benefits and transparency of a spot Bitcoin ETF.
| Year | Key Events |
|---|---|
| 2017 | First Bitcoin ETF applications submitted and rejected by SEC |
| 2021 | Several more Bitcoin ETF applications rejected or withdrawn |
| late 2021 | First Bitcoin futures ETFs approved |
| 2022 | More Bitcoin futures ETFs launched |
| Early 2023 | Spot Bitcoin ETF applications re-submitted with amendments |
This table summarizes the key events over the years leading up to the current situation.
Frenzied Activity As Decision Deadline Looms
Over the past week, a flurry of activity has transpired around the pending Bitcoin spot ETF applications.
On January 8th, several of the ETF issuers, including heavyweights like BlackRock and Ark Invest, submitted amendments to their filings. These amendments included final fee structures and other product details required before potential approval.
Additionally, the issuers have secured relationships with external trading firms to handle liquidity and trading for the ETFs if approved. For example, BlackRock selected highly reputable trading shops Jane Street and Cumberland to facilitate trading for its spot Bitcoin ETF.
These final amendments kicked off a 240-day review deadline for the SEC per regulatory rules.
Countdown To Decision Day
Industry experts now widely expect the SEC to announce its ruling on the Bitcoin ETF applications sometime between January 11th-13th based on typical review timelines.
Approval could set off a frenzy of crypto investing, with over $50 billion of fresh capital flowing into Bitcoin in the first year according to analysis from Standard Chartered bank.
On the other hand, another denial would likely crush short-term sentiment across crypto markets.
In the leadup to the imminent decision, crypto markets saw a relief rally over the past week, regaining over $100 billion in market capitalization. However, anxiety persists given the high uncertainty.
Date | Bitcoin Price | Market Value
-|-|-
Jan 1 | $16,500 | $320 billion
Jan 8 | $17,800 | $340 billion
This table outlines the recent price recovery ahead of the expected ETF decision.
Key Players Jockey For Position
The pending Bitcoin ETF decision has set up a battle of the titans between the largest asset managers in the world.
BlackRock, Vanguard, and State Street Global Advisors have all thrown their hats in the ring with spot ETF applications. These Wall Street giants oversee a combined $30 trillion in customer assets, which they could immediately funnel into Bitcoin if given the green light.
On the other hand, Ark Invest led by famous stock picker Cathie Wood has emerged as another top contender. While much smaller than the Wall Street incumbents, Ark is a crypto native firm with over $40 billion invested solely in disruptive innovations like Bitcoin.
At stake is not only the flows from the ETF itself but also the halo effect on broader Bitcoin adoption and legitimacy.
Gensler And SEC Lean Toward Approval
Gary Gensler, the crypto-savvy Chairman of the SEC, has provided optimism that 2023 may finally be the year for a spot Bitcoin ETF approval.
In recent public comments, Gensler stated he directed his staff to work quickly through the pending applications before the 240-day deadline. Many industry experts have read between the lines and believe his comments signal likely approval.
Additionally, the SEC itself published a request for comments on the recent amendments from issuers. This procedural step would not be necessary if they planned to reject the proposals outright.
With the crypto community sitting on pins and needles awaiting the imminent decision, one thing is clear – these next few days will dramatically impact the future of the industry and Bitcoin itself. The stakes could not be higher for both sides.
What Happens Next?
- If approved, expect a surge of institutional and retail capital flooding into Bitcoin, likely pushing it to new all-time highs. However, the inflows may take several weeks to materialize.
- If denied, prepare for a sharp crypto market sell-off as hopes get dashed short-term. Though many still expect ultimate approval in late 2023 or 2024.
- Whatever the outcome, this decision removes a major regulatory overhang that has weighed on crypto prices for years. Just gaining clarity one way or another could spark big market moves.
The crypto community now awaits the judgment of the SEC Gods. Check back here over the coming days as the story continues to unfold!
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
