When Will Spot Bitcoin ETF Sales Begin
Market participants are confident that the SEC will approve applications for Spot Bitcoin ETFs anytime soon. Let's see whether this is the case.
What is it, and why is it important?
A spot Bitcoin ETF (Exchange-Traded Fund) provides investors with real-time access to the price of Bitcoin, with no need to directly own the cryptocurrency. The difference between a spot ETF and a futures ETF is that a spot ETF directly owns the actual Bitcoins, not its futures contracts.
Spot Bitcoin ETFs provide investors, especially those who don't want to or can't own Bitcoins directly, the opportunity to gain exposure to changes in the price of Bitcoin on an exchange, similar to what is done with stocks in traditional ETFs.
Spot Bitcoin ETFs safely store Bitcoins in a secure vault managed by trusted custodians. An ETF fund buys Bitcoins from users on conventional cryptocurrency exchanges, sends them to a secure vault, and issues shares corresponding to a set number of Bitcoins it owns. The price of the shares must reflect the prevailing market price of the cryptocurrency, and the shares themselves are available for public trading on traditional stock exchanges. ETFs track the exact price of Bitcoin and rebalance their assets by buying or selling tokens. This process is managed by authorized participants (APs). These can be financial organizations that create or redeem shares.
For investors and traders, buying a spot Bitcoin ETF is like buying shares of any other ETF or security. Spot Bitcoin ETFs open up more opportunities for institutional and retail investors and minimize various risks of holding cryptocurrency.
Spot Bitcoin ETFs are important because they are not only accessible to a wider range of investors, but also lower barriers to entry, provide increased liquidity, transparency, etc.
Despite such obvious advantages of the existence of spot Bitcoin ETFs, the U.S. Securities and Exchange Commission is in no hurry to approve applications from financial institutions that seek to provide spot Bitcoin ETF services to the market. The main reason for the rejections is concerns about market manipulation and fraud. Nevertheless, the market is confident that the SEC has no choice but to approve the applications and is making predictions as to when this event will occur.
The Spot Bitcoin ETF vs. SEC saga
The spot Bitcoin ETF application approval issue intensified in 2023, when the US Securities and Exchange Commission lost its lawsuit against Grayscale and never appealed the court's decision. The cryptocurrency market saw a glimmer of hope, and recently the news agenda has been dominated by reports of possible launch dates for long-awaited spot Bitcoin ETFs. Long-awaited, because the saga of the commission reviewing applications has been going on for ten years.
In 2013, the Winklevoss brothers were among the first to apply for a spot Bitcoin ETF. At the time, the price of Bitcoin was around $100. The Winklevoss Bitcoin Trust was to be the first such ETF fund on the market. The hand reached out to the traditional market was ignored. In 2017, the SEC rejected Winklevoss' attempt, citing a long-earned phrase about fears of market manipulation.
Following the Winklevoss brothers, other major market participants filed applications, but all of them were rejected by the SEC. Grayscale Investments filed an application back in 2016 and spent the next year, 2017, in negotiations with the regulator. However, the company had to eventually withdraw its application. In 2019, Bitwise made its attempted filing and withdrew its application in 2020 as well. In 2021, the company filed another unsuccessful application. The SEC continued to reject applications for a spot Bitcoin-ETF, citing the issue of market manipulation.
Ark Invest and 21Shares have joined the wave of spot Bitcoin ETFs in 2023. Stock market titan BlackRock has also tried its luck with an application. The SEC is currently reviewing applications from Grayscale, BlackRock, Valkyrie, WisdomTree, ARK Invest, 21Shares and others.
The SEC's capricious behavior did not please Grayscale, and the company sued the regulator. The court sided with Grayscale. 2023 was a year of paperwork for the SEC. The regulator kept postponing the consideration of applications, which kept growing in number.
When will the Spot Bitcoin ETF trade launch and how will it affect the Bitcoin price
Many analysts agreed that the SEC will approve applications to create spot Bitcoin ETFs in 2024. CoinShares even suggested that the regulator needs political momentum to approve the applications, as traditional financial giants such as BlackRock are involved.
The companies themselves also seem confident that their applications will be approved soon. Bitwise has launched an ad campaign featuring Jonathan Goldsmith. Hashdex and VanEck have also joined the start of the marketing fight.
The positive outcome of the fate of spot Bitcoin ETFs is also indicated by the SEC's request for 19b-4 amendments to the current filings. On January 5, such amendments were filed by BlackRock, Valkyrie, Grayscale, Bitwise, Hashdex, ARK 21Shares, Invesco Galaxy, Fidelity, Franklin Templeton, VanEck and WisdomTree. Some experts propose that the final approval of spot Bitcoin ETFs will happen before January 10. This is the deadline for applications from ARK Invest and 21Shares.
Still, not everyone is confident that the SEC will approve the applications in the near future. Most financial advisors say that the applications will not be approved this year.
Amid rumors about the imminent approval of applications, the Bitcoin price soared to $46,000 at the beginning of the week. The price held at $45,000 the following days, but a recent report from Matrixport, dropped the asset to $42,000. The report claimed that the SEC would not approve applications for spot Bitcoin ETFs in the coming days. Still, not everyone took the report seriously, as the same company predicted a bullish market move.
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If spot Bitcoin ETFs are approved, how will it affect the price of the major cryptocurrency? The move is expected to attract a significant influx of investments into the cryptocurrency, as it will remove a lot of legal and technical concerns that currently surround BTC. Bitwise Asset Management believes that the emergence of spot Bitcoin ETFs will cause a veritable gold rush. A possible increase in demand for Bitcoin, combined with a fixed supply of the asset, could trigger a similar bull run as in 2021. The emergence of more serious players may bring some stability to the cryptocurrency market.
Spot Bitcoin ETFs will affect the Bitcoin price indirectly rather than directly. Spot Bitcoin ETFs will attract more players to the industry, which will spur the asset to growth. The launch of spot Bitcoin ETFs will strengthen Bitcoin in the mainstream financial system. Legitimacy will influence market approval, which will also push the asset to grow. Spot Bitcoin ETFs can increase the liquidity of the Bitcoin market by increasing the number of buyers and sellers. Greater liquidity could lead to more stable prices and less volatility, making Bitcoin more attractive to ordinary investors.
Still, Bitcoin supporters believe that ETF funds could ruin the true nature of BTC by turning it into a simple asset class focused only on short-term trading and price fluctuations.
