Crypto Markets Slump Despite SEC Meetings With Spot Bitcoin ETF Applicants

The crypto markets are tumbling in spite of the U.S. Securities and Exchange Commission (SEC) confirming a fresh round of meetings with prospective spot Bitcoin ETF issuers.

According to CoinMarketCap, the combined capitalization of crypto assets has crashed more than 7% since peaking at $1.65T in the past 50 hours. Both BTC and ETH are down around 7% from their local highs on Sunday, also slumping by 1.5% and 2.6% today respectively.

Alternative Layer 1 networks were among the worst performers of the past 24 hours. Avalanche (AVAX) posted the third heaviest losses among top 100 assets with a 15.3% drawdown, followed by MultiversX (EGLD) with 14.3%, THORChain (RUNE) in sixth with 9.5%, Algorand (ALGO) in seventh with 9.3%, and Mina (MINA) in ninth with 8.9%. Solana (SOL) also came in 14th with a notable loss of 6.3%.

The pull-back is the first time the crypto markets have sold off despite new progress on the pending spot Bitcoin ETF applications from major institutions in recent memory.

On Dec. 12, James Seyffart, an analyst at Bloomberg, posted screenshots of memorandums published by the Securities and Exchange Commission (SEC) confirming it met with four prospective issuers over the past week, including Grayscale, Fidelity, and Franklin Templeton. The SEC also met with BlackRock, the world’s largest asset issuer, for the third time in as many weeks.

Both the SEC’s Division of Trading and Markets in addition to the Division of Corporate Finance were present at the meetings.

Similar announcements from the SEC have recently driven bullish momentum in the markets, with speculators seeking to bolster their exposure to BTC amid growing expectations a spot Bitcoin ETF could soon receive approval. However, the markets continued to pull back, shrugging off news of the SEC memorandums on this occasion.

Nate Geraci, co-founder of The ETF Institute, tweeted that the discussions continued to focus on debating the merits and process underpinning “in-cash” versus “in-kind” share redemptions, inferring that the SEC is seeking to ensure that registered broker-dealers do not handle BTC directly.

In-cash redemptions would allow ETF investors to redeem their shares for USD, while in-kind would enable investors to receive BTC for their shares. Seyffart previously reported that the SEC would prefer in-cash delivery, whereas BlackRock has a preference for in-kind redemptions.

Seyffart, who has long tipped that the first U.S. spot Bitcoin ETFs could be approved around Jan. 10, 2024, clarified that the funds may not be listed until a few weeks after receiving approval. “Not clear yet if we’d see a listing that week or even the week after,” he tweeted. “Could be a gap.”