The Bitcoin Spot ETF – Countdown to Approval

It’s decision time. By the end of this week, we’ll have our answer – will one or more Bitcoin Spot ETFs be given the green light to trade in the U.S? And how will the market respond?

In the race towards the approval of a spot Bitcoin exchange-traded fund (ETF), the final steps are underway, with asset managers set to submit any crucial remaining revisions by the morning of January 8.

These revisions, to be finalized through S-1 filings, must be submitted no later than 8:00 am Eastern Time, or 13:00 UTC. Investors eagerly await these filings, anticipating insights into remaining fees and tickers. Notably, some applicants, including BlackRock, have yet to disclose the associated fees for their respective ETFs.

Following the submission of the 19-b4 amendment forms by asset managers after market closure on January 5, both S-1 and 19b-4 forms represent the last hurdles before a final decision from the United States Securities and Exchange Commission (SEC).

The final stage in this process could involve a vote by SEC commissioners. As of the commission’s public agenda, no scheduled events are listed before January 11, aligning with market expectations for the potential debut of the ETFs.

However, Bloomberg ETF analyst Eric Balchunas suggested that the SEC might utilize its delegated authority policy, leaving uncertainty around whether a formal vote will occur.

“We’re not even sure they’re going to vote. They could use something called delegated authority, but we don’t know. It looks like there are three options: whether they vote or use delegated authority, which means they must approve it because when they denied the past ones, they didn’t have a vote,” Balchunas wrote on X.

Balchunas anticipates that most applicants meeting the regulator’s requirements before December 29 will likely receive approval this week.

However, he speculated that Grayscale, aiming to convert its over-the-counter Grayscale Bitcoin Trust into a listed BTC ETF, might receive its decision after the initial approval of the first applicant, citing potential differences in their application process.

Spot Bitcoin ETFs: Unlocking Opportunities

A spot Bitcoin ETF, which tracks the actual price of BTC rather than its derivatives like Bitcoin futures, could represent a breakthrough for the U.S. market. While such ETFs have gained approval in Europe, Canada, and Brazil, the SEC has previously rejected applications due to concerns about potential market manipulation.

The approval of a spot Bitcoin ETF in the U.S. would not only be a milestone for crypto investors but also present a substantial opportunity for financial advisors. These ETFs, renowned for their efficiency and popularity, could unlock a $50 trillion market across financial advisors, retail investors, and private banks, fostering market maturity and institutional investor confidence.

Navigating Regulatory Actions and Timelines

The regulatory process for spot Bitcoin ETFs involves two key documents: the Registration Statement (Prospectus) for the Fund and the proposed rule change in a “19b-4” filing. Exchanges play a pivotal role in this process, with the 19b-4 filing serving as a request for approval of rules changes, including the addition of a new ETF.

The timeline for approval is convoluted, with the SEC having the authority to delay decisions for up to 240 days from the public recording of a filing. The upcoming deadline for one of the applications is January 10, leading to speculation that certain 19b-4 filings may be approved around this date.

New Year, New Opportunity for Bitcoin Investors

As the crypto community eagerly anticipates the SEC’s decision on spot Bitcoin ETFs, the cryptocurrency market is poised for an unprecedented opportunity early in the new year. The potential approval of spot ETFs coincides with a demand shock for Bitcoin alongside the April 2024 halving, offering investors a unique confluence of factors that historically result in favorable outcomes.

The question is, how will the market respond? As Bitcoin has already experienced a 61% rally since early October, driven in large part by heightened expectations of approval for spot Bitcoin ETFs, some market observers are forecasting a sell-the-news-induced pullback once the ETFs are officially approved.

Comparisons are drawn to past market events, such as the debut of CME Bitcoin futures in December 2017, Coinbase’s Nasdaq listing in mid-April 2021, and the introduction of various futures ETFs, including BITO. Historical trends indicate that Bitcoin, following rallying periods during these events, experienced subsequent crashes in the weeks that followed.

For instance, the three days leading up to the SEC’s approval of the first futures ETFs saw Bitcoin surge by 15%. However, a month later, the cryptocurrency reached a record high of $69,000 before plummeting into a bear market that endured for over a year. Analysts caution that historical precedents suggest a potential post-ETF approval downturn, emphasizing the importance of monitoring market dynamics in the aftermath of regulatory decisions.

Others are more bullish, however, with the likes of Max Keiser and Samson Mow predicting billions of dollars of new flow into bitcoin once the ETFs start trading.

If the ETFs are approved, expect a marketing war to begin, with the various asset managers competing to communicate Bitcoin’s narrative to an army of financial managers. In the long term, nothing could be more bullish for Bitcoin.