Is Grayscale’s Triumph the Catalyst for Spot Bitcoin ETF Approval?

Investment sentiment soars after Grayscale won over the SEC, but what lies ahead?

A District of Columbia Court affirmed the victory of crypto fund manager Grayscale over the U.S. Securities and Exchanges Commission (SEC).

According to the report, the court reviewed the SEC’s list of reasons to reject Grayscale’s previous proposal.

On the other hand, Grayscal’s concrete evidence showed a link between Bitcoin prices and futures prices on the Chicago Mercantile Exchange, which was approved by the SEC.

A Big Win For Bitcoin

As a result, the court couldn’t find any reasonable argument for the rejection and thus requested the SEC to review Grayscale’s Bitcoin ETF proposal and reverse the securities agency’s rejection.

The legal dispute started on June 30, 2022, after the SEC rejected Grayscale’s application to convert Grayscale Bitcoin Trust to a Bitcoin ETF Spot fund. The main reason was reportedly the SEC’s concerns about the risk of market manipulation, the lack of a market control agreement, and an SEC-regulated exchange.

This is the second major victory of a crypto firm over the SEC this year following the partial triumph of Ripple (XRP). While the ruling doesn’t signal a Bitcoin spot ETF approval, nor that the regulatory body would allow Grayscale’s proposal, it still sparks optimism among crypto members.

Shortly after the announcement, Bitcoin hit $28,000, and Ethereum surpassed $1,700. Other altcoins also see green candles, with CyberConnect (CYBER) leading the gainers with an over 90% surge. According to on-chain data, a whale spent about 13.66 million USDC to buy 8,000 ETH for 1,708 USD after Grayscale’s news broke out.

Adding to the bullish momentum was the news of X (formerly Twitter), which announced that the platform got a license for crypto payments and trading on the same day. With all this interest, Bitcoin prices may rise in coming weeks.

Recent data from CryptoQuant reveals that Bitcoin’s trading volume reached its lowest point over four years. This decline encompasses spot and derivatives exchanges and began earlier this month, persisting with a struggle for recovery.

A confluence of factors has contributed to this downturn. The U.S. regulatory clampdown on cryptocurrencies, coupled with the banking crisis in May, has prompted market makers and traders to distance themselves from Bitcoin.

Consequently, liquidity within the Bitcoin market has experienced a significant drop, with trading volumes sinking to levels unseen in years.

The sell-off on August 17 was the largest single-day decline in Bitcoin’s price since the FTX crash in November 2022. However, the market swiftly settled into a calm state, suggesting that long-term investors are not easily swayed by recent weakness.

What Lies Ahead After The Win?

The SEC now faces three options regarding Grayscale’s Bitcoin ETF proposal: delay, approve, and file an appeal and a list of legal battles with major exchanges, including Binance and Coinbase.

Experts and lawyers have argued that appealing the court ruling might not be the best option for the SEC. They argue that it could require additional financial resources and would unlikely succeed.

Additionally, many regulators have voiced disagreement with how the SEC regulates the sector, which could make it more difficult for the SEC to win an appeal. To be sure, the SEC has been rough on cryptos.

A Bitcoin Spot ETF has been in the headlines in recent months, driven by a wave of interest from prominent Wall Street giants such as BlackRock, Fidelity, WisdomTree, Valkyrie, VanEck, and Invesco. These companies previously submitted applications to launch the product.

In light of recent developments, many industry experts express optimism, assessing the likelihood of approval for the Bitcoin Spot ETF at a robust 65% despite the SEC’s traditionally cautious stance.

Historically, the regulatory agency repeatedly cited concerns surrounding speculation, manipulation, and fraud within the Bitcoin market as grounds for rejection.