The Race for a Spot Bitcoin ETF As SEC Deadlines Approach

Within the cryptocurrency sector, thirteen applicants, including prominent names like Invesco Galaxy, Bitwise, WisdomTree, and Fidelity, have updated their S-1 filings with the United States Securities and Exchange Commission (SEC) for establishing spot Bitcoin exchange-traded funds (ETFs).

The move came right on the deadline set by the SEC, underscoring the intensifying competition and eagerness among financial institutions to delve into the burgeoning crypto market.

Last-minute rush to meet SEC deadline

As the SEC’s deadline loomed for amendments to the S-1 applications for spot Bitcoin ETFs, a flurry of activity was witnessed on Dec. 29. Various key players in the finance and investment sectors, including Invesco Galaxy, Bitwise, WisdomTree, and Fidelity, joined the race alongside other heavyweights such as BlackRock, Van Eck, and Valkyrie. These filings reflect the heightened interest and the growing mainstream acceptance of cryptocurrencies as legitimate investment vehicles.

Each applicant brought unique elements to their proposals, highlighting the diverse approaches and strategies being employed to gain approval from the SEC. For instance, Fidelity, WisdomTree, and Invesco Galaxy disclosed their chosen authorized participants in their latest submissions. Invesco Galaxy has teamed up with Virtu and JPMorgan, demonstrating its commitment to partnering with established financial entities. WisdomTree and Fidelity have entrusted Jane Street Capital with the crucial role, indicating a strategic move towards engaging with experienced market makers.

Strategies and competitive edges

In a notable strategic decision, WisdomTree has opted to maintain its mechanism of in-kind share creation and redemption, despite suggestions from the SEC to consider a cash-based approach. The decision indicates WisdomTree’s confidence in its existing model and its determination to stand out in the crowded field of applicants.

Moreover, an emerging price war has been identified by analysts like Eric Balchunas. Invesco Galaxy has made a bold move by waiving its fee for the first six months and the initial $5 billion in assets under management. The aggressive pricing strategy is likely aimed at quickly capturing a significant market share. In contrast, Fidelity has set its fee at a competitive 0.39%, showcasing its attempt to balance affordability with sustainable business operations.

Bitwise, another major contender, is yet to announce its authorized participants. However, it disclosed in its revised S-1 that an unnamed entity is interested in purchasing up to $200 million in shares of the proposed ETF, hinting at substantial institutional interest in its offering.

Broader implications and Grayscale’s unique position

The collective rush to submit revised applications for spot Bitcoin ETFs is not just about individual company ambitions. It represents a broader shift in the financial landscape, where digital assets are increasingly being acknowledged as significant investment options. The trend is further reinforced by the diverse array of firms, including BlackRock, Van Eck, Grayscale, Bitwise, WisdomTree, Invesco Galaxy, Fidelity, ARK Invest, Valkyrie, Franklin, Hashdex, Global X ETFs, and Pando Asset, all vying for a piece of the crypto ETF pie.

Grayscale’s recent submission, following the resignation of Barry Silbert from its board of directors, is particularly noteworthy. The firm intends to transform its Grayscale Bitcoin Trust into a cash-only spot ETF, similar to the strategy adopted by Van Eck and earlier by BlackRock. It move, amidst an ongoing SEC investigation involving Silbert and the Digital Currency Group, adds another layer of intrigue and complexity to the unfolding narrative.

Conclusion

The race for establishing the first spot Bitcoin ETF in the United States has reached a pivotal juncture. With the SEC’s deadline for amendments now passed, the focus shifts to the regulatory body’s response to these varied and ambitious proposals. As the applicants await the SEC’s decision, the financial world watches closely, understanding that the approval of a spot Bitcoin ETF could mark a significant milestone in the integration of cryptocurrencies into the mainstream financial system.