<\/p>\n
One approval and the dominoes will fall. That\u2019s the dogma driving expectations for a U.S. spot Bitcoin exchange-traded fund (ETF). If only the industry\u2019s bogeymen at the U.S. Securities and Exchange Commission (SEC) would approve that one application, approvals will snowball, institutional cash will flood in, and all will be right in the world of the blockchain.\u00a0<\/p>\n
That goal appeared to edge a step closer <\/a>Monday. The SEC confirmed it will not contest a court decision in favor of digital asset investment firm Grayscale\u2019s right to convert its GBTC (Grayscale Bitcoin Trust) into a spot Bitcoin ETF. Bitcoin was up over 19% for the past seven days on the back of the news, sitting above the US$34,000 support level as of 2.30 p.m. Wednesday in Hong Kong, according to CoinMarketCap<\/a> data. The coin briefly broke US$35,000 during Tuesday trading, its highest level since May 2022.\u00a0<\/p>\n A Grayscale spokesperson said that the company now hopes to \u201cwork constructively\u201d with the SEC on its efforts to convert GBTC \u2014 currently the world\u2019s largest cryptocurrency fund with US$16.7 billion in assets under management \u2014 into a spot Bitcoin ETF. \u201cGBTC is operationally ready, and we intend to move as expeditiously as possible on behalf of our investors,\u201d the spokesperson said.<\/p>\n But it\u2019s not just Grayscale investors who are waiting<\/a> for a U.S. spot Bitcoin ETF. The financial instrument \u2014 which would allow investors a way to invest in the coin on a traditional exchange \u2014 is seen as a way to open up the still marginal world of crypto investment to traditional finance.\u00a0<\/p>\n \u201cYou\u2019re going to have a lot of people getting into crypto by the way of an ETF,\u201d said Jack Jia, head of crypto at payment platform Unlimit. He said the primary benefit of a spot Bitcoin ETF is that it improves the user experience (UX) for would-be crypto investors.\u00a0<\/p>\n \u201cThey won\u2019t need to use account abstraction or a custodial wallet because their UX is their broker,\u201d Jia added. \u201cThey\u2019re telling their customers or their clients to buy Bitcoin. So that is going to be the onboarding process, if you will.\u201d<\/p>\n Other than Grayscale, a range of institutional investors, from BlackRock to Fidelity to Ark Invest, have applied to the SEC for permission to create a spot Bitcoin ETF in the U.S., the world\u2019s largest economy. The SEC has so far either rejected or delayed making a decision on the applications, citing fears about a lack of liquidity and price manipulation in crypto markets.<\/p>\n But Vivian Fang, a FinTech expert and professor of finance at Indiana University, said she sees various signs that the SEC is now \u201cwarming up\u201d to the idea of approving a spot Bitcoin ETF. She pointed to recent comments<\/a> coming out of the regulator that it now considers the Bitcoin market to be of a sufficient size to resist market manipulation.\u00a0<\/p>\n This, Fang said, has made her feel \u201ccautiously optimistic\u201d that the SEC will approve at least one spot Bitcoin ETF application by the end of this year.<\/p>\n According to research<\/a> released Oct. 16 by blockchain data firm CryptoQuant, an SEC decision to allow the creation of spot Bitcoin ETFs by the seven largest asset managers with pending applications could bring up to US$155 billion into the Bitcoin market. Based on their analysis of the coin\u2019s past bull run behavior, CryptoQuant calculated that would increase Bitcoin\u2019s market capitalization by US$450 billion to US$900 billion, adding US$1 trillion to the wider crypto market along the way.\u00a0<\/p>\n The Next Wave of #Bitcoin<\/a> Institutional Adoption: \u2013 SPOT ETFS AS THE NEW WAY OF INSTITUTIONAL ADOPTION. Prepared by Our Head of Research, @jjcmoreno<\/a>.<\/p>\n Link\ud83d\udc47https:\/\/t.co\/dKyd5GJJdT<\/a> pic.twitter.com\/ECEWMpkf0g<\/a><\/p>\n \u2014 CryptoQuant.com (@cryptoquant_com) October 16, 2023<\/a><\/p><\/blockquote>\n The crypto market has, over the past week in particular, shown a wholehearted desire<\/a> to buy into that narrative. Crypto media picked up on a social media post Oct. 16 saying the SEC had approved BlackRock\u2019s spot Bitcoin ETF application. The crypto market blew up. The price of Bitcoin soared nearly 10%, rising to around US$30,000 before falling back down to the US$28,000 range.\u00a0<\/p>\n The news, it turned out, was fake. Regardless, there was around US$100 million in BTC liquidations in the first 30 minutes following the story. Cointelegraph, the media organization that first reported on the misleading post, issued a clarification<\/a> statement apologizing for the error. But the damage \u2014 or the improvement, depending on which way you look at it \u2014 was done.\u00a0<\/p>\n Whether or not the original post was a legitimate attempt to manipulate the market or simply a prank gone too far, the fake news attracted a flood of interest and mainstream media attention to the ongoing ETF discussion.\u00a0<\/p>\n BlackRock Chief Executive Officer Larry Fink, once a vocal skeptic of the crypto industry, appeared on a Fox Business broadcast, saying that the Bitcoin price rally to US$30,000 was more than just investors buying the rumor. Rather, he said<\/a>, it was \u201can example of pent-up interest in crypto\u201d trading as a \u201cflight to quality\u201d during a time of geopolitical uncertainty.\u00a0<\/p>\n On Monday, Oct. 23, as the market digested the likelihood the SEC would forgo an appeal on the Grayscale decision, an ETF analyst at Bloomberg Intelligence highlighted that BlackRock had listed<\/a> its spot Bitcoin ETF on the Depository Trust and Clearing Corporation (DTCC) website.<\/p>\n A bullish sign that the ETF could soon see approval from the SEC, Bloomberg Intelligence ETF specialist Eric Balchunas posted to X (formally Twitter) that this was \u201canother step in the process of launching.\u201d<\/p>\n Note: Seeding is typically not a lot of money just enough to get ETF going. So I wouldn’t read this as ‘omg Blackrock is buying a ton of bitcoin’ at all but more the fact they doing it and disclosing it shows another step in the process of launching.<\/p>\n \u2014 Eric Balchunas (@EricBalchunas) October 23, 2023<\/a><\/p><\/blockquote>\n While the road ahead for one, if not multiple spot Bitcoin ETF approvals appears to be growing smoother, there are potential road bumps ahead. For Adam Berker, senior legal counsel at global payment platform Mercuryo, the principal obstacle remains the potential for lawsuits against the SEC.<\/p>\n \u201cIf the regulator were to accept the ongoing application from BlackRock, it may be criticized in the future over why it gave a green light for a large institutional player from the [traditional finance] sector while raising so much fuss over younger and smaller crypto projects,\u201d Berker said via a note.<\/p>\n The past 18 months in the crypto industry have been characterized by corporate failures and capital flight resulting in a two-thirds drop off in the value of a once US$3 trillion industry. From the perspective of many crypto advocates, much of those losses were caused by increased scrutiny<\/a> and so-called \u201cregulation by enforcement\u201d from the SEC and fellow regulator the Commodity Futures Trading Commission (CFTC).\u00a0<\/p>\nBullish behavior<\/strong><\/h2>\n
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The Launch of Spot ETFs<\/p>\n
\u2013 IMPLICATIONS OF ETF APPROVALS FOR BITCOIN MARKET CAPITALIZATION.<\/p>\n\n
Road bumps<\/strong><\/h2>\n