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Resurgent Bitcoin Shrugs Off SEC, Eyes Spot ETF Approval
In recent weeks, the cryptocurrency space has lit up with chatter over the possibility of the Securities and Exchange Commission (SEC) approving a spot Bitcoin ETF, which the community believes would be a turning point for the leading cryptocurrency.
For the past ten years, the SEC has consistently shot down the idea of a spot ETF. The community hopes that this time, with the influential player BlackRock (BLK) entering the fray, the SEC might change tune.
Meanwhile, sections of the community believe that the increased spotlight on Bitcoin is a good thing for the entire industry.
They anticipate that the increased spotlight will refocus attention on Bitcoin as the original and authentic cryptocurrency protocol and not the thousands of other chains they deem a distraction.
ETF Fervor
The ETF fervor was set off by BlackRock’s filing for a spot Bitcoin ETF in June via its iShares unit.
This move energized other fund management companies to follow suit. Valkyrie, Invesco (IVZ), Wisdom Tree (WT), and Fidelity, whose previous spot the commission turned down Bitcoin BTF applications, all submitted fresh applications.
The raft of ETF applications in the US coincides with the upcoming launch of Europe’s first Bitcoin ETF. London-based Jacobi Asset Management is expected to list its Bitcoin ETF on the Euronext Amsterdam by the end of July. The digital funds manager got the nod from the regulators of the Island of Guernsey to issue a physically-backed ETF.
Jacobi had set its sights on launching the ETF as early as last year but withdrew due to the year’s uniquely rocky market conditions that saw several ventures sink.
Despite the SEC’s history of rejecting all spot ETF applications over concerns about market manipulation and inadequate investor protection, there is growing optimism that BlackRock’s influence may finally sway the agency.
As the world’s largest money manager, overseeing a record $10 trillion portfolio, BlackRock wields considerable clout not just in finance but also in politics.
Moreover, BlackRock is meeting the “surveillance sharing agreement” requirement that the SEC has continuously indicated as a non-negotiable for it to consider a spot BTF application. As a result, the other companies are also returning to the drawing board to see how to comply with the requirement.
Bitcoin is the Crown Jewel
Between the SEC, BlackRock, and in general, the buzz of a spot Bitcoin ETFs, Bitcoiners view the spotlight as good for the health and image of the crypto industry, especially after the roller coaster that was last year. Then there’s the current quagmire where the agency has brought sweeping charges against the two biggest exchanges, Coinbase and Binance, for “operating as unregistered clearing houses” among other alleged offenses.
One of the important revelations from the charges against Coinbase and Binance was that 69 coins — including heavyweights like Solana, Cardano and Polygon — were considered securities by the SEC. That doesn’t mean those coins are actually securities but it gives you an idea of their thought process. Bitcoin was notably absent.
It speaks to Bitcoin as the most relevant cryptocurrency — one that, even after all this time and thousands of knock-off cryptocurrencies, is still the crown jewel of crypto.
This sentiment had been echoed by several observers, with Galaxy CEO Mike Novogratz telling Bloomberg that “real adoption (for BTC) is coming” and that an ETF would be a “seal of approval from the government and the SEC that this is an asset.”
And Michael Sonnenshein, Grayscale CEO, told CNBC that Bitcoin rallying to a 13-month high is a favorable response by the market to the interest of traditional financial institutions in spot Bitcoin ETFs. This trend, he believes, “lends further validity to an asset that was once believed to be a passing fad … underscoring the staying power of Bitcoin.”
A company like BlackRock has a track record of listening to investors, even with its CEO’s initial less-than-approving stance about Bitcoin. CEO Larry Fink, who once slammed Bitcoin as “an index of money laundering“, now says the cryptocurrency could “revolutionize finance.” Fink’s about-face signals that BlackRock’s investors want to continue to look into Bitcoin’s potential.
What's a Spot Bitcoin ETF?
A Bitcoin exchange-traded fund (ETF) lets investors invest in the coin without directly buying the underlying cryptocurrency. The concept is borrowed from traditional ETFs, which are funds that trade on exchanges and track the performance of an asset or a basket of assets.
Some two forms of a Bitcoin ETF include a spot ETF or a future-based ETF. A future-based ETF is traded on an exchange that holds contracts for Bitcoin futures. These contracts comprise an arrangement to buy or sell Bitcoin at a predetermined price on a specified date.
A spot Bitcoin ETF offers investors an indirect means of investing in the cryptocurrency, just like a futures ETF. However, the key difference is a spot ETF invests in Bitcoin at its current market price, also known as the spot price.
Bitcoin ETFs allow investors to participate in the Bitcoin revolution without the less-than-desirable elements of investing in Bitcoin — such as signing up on exchanges and the demands of self-custody.
Bitcoin proponents consider spot ETFs superior to futures ETFs since the former gives investors direct exposure to the cryptocurrency, making for its true adoption.
The SEC has authorized several futures ETFs but has tossed out over a dozen spot Bitcoin ETFs and, for the first time, authorized a leveraged 2x Bitcoin ETF by Volatility Shares to begin trading. Such an ETF gives Bitcoin investors exposure to the currency by putting up just half of the value of Bitcoin.
Grayscale sued the commission last year over its refusal to grant the digital funds manager a spot Bitcoin ETF, terming the decision “arbitrary, capricious, and discriminatory.”
The Winklevoss twins — the founders of the Gemini exchange, were the first to file for approval for a spot Bitcoin ETF in 2013, which the watchdog declined.
The Bottomline: Bitcoin is Locked and Loaded
It’s too early to tell whether the SEC will finally capitulate and authorize a spot Bitcoin ETF.
A spot Bitcoin ETF would be a landmark moment for Bitcoin. But before then, the high level of regulatory and institutional attention that Bitcoin’s courting is causing people to rediscover the original cryptocurrency — Bitcoin, and its potential. Such attention is good for the overall crypto industry.
