Bitcoin ETF Approval Imminent: What to Expect
A Bitcoin ETF could finally start trading in the U.S.—possibly as soon as next week—after 10 years of the U.S. Securities and Exchange Commission saying no to the investment vehicle. The long list of high-profile applicants have been fine-tuning their S-1 filings and analysts at Bloomberg have said a launch now has a 90% chance of happening by January 10.
If it happens, it means traditional retail investors will at last have a way to gain exposure to Bitcoin without having to buy and store the digital asset directly. In other words, they could invest in Bitcoin without fussing with cryptocurrency exchanges, digital wallets, and seed phrases.
What if a Bitcoin ETF doesn’t get approved?
The SEC could still technically deny the product—but that’s unlikely, experts told Decrypt. The SEC has spent the best part of a decade refusing the vehicle, saying that because Bitcoin is largely global and decentralized, it is more vulnerable to market manipulation.
Things have changed now, and since last year, more prestigious financial institutions—like BlackRock and Fidelity—have applied to the SEC. And applications have since come a long way, with would-be issuers altering their S-1 forms to suit the SEC’s desires.
Dave Nadig of data analytics company VettaFi and the co-author of “A Comprehensive Guide To Exchange-Traded Funds” said that the regulator was asking for too much detail from potential issuers to deny the product again.
Still, if for whatever reason the ETF isn’t approved, the market won’t likely take the news lightly. We got a preview of that today following a bearish report from digital asset manager Matrixport which made the bold prediction that the SEC would indeed deny all pending applications. The report rattled markets causing Bitcoin to crash by more than 7% within minutes.
One Bitcoin ETF issuer might steal the show
The SEC currently has a list of 14 high-profile firms trying to get approval. These include the likes of BlackRock, WisdomTree, and VanEck. Where is all the money going to go if the SEC gives the green light to all of them?
Analysts such as Bloomberg Intelligence’s Eric Balchunas have said that a lot of ETFs could launch in one day and if that happens, interest could be dispersed as well.
There is also the possibility of Grayscale getting the green light at the same time, too. Crypto asset manager Grayscale is hoping to turn its popular Bitcoin Trust (GBTC) into a spot ETF. If that happens, it could steal the show.
“Where the volume shows up is a little bit of a secret sauce, mystical union quest,” said Nadig, adding that “if GBTC is included in that initial launch, it could get all the volume because there are a lot of people who are already in it that may want to unload it.”
Currently, only accredited investors can directly put cash into GBTC (GBTC shares can be bought on the secondary market via formal US brokerage or retirement accounts, though.) But if the fund turns into an ETF, all investors with access to U.S. markets will be able to buy and sell shares of the ETF in real-time.
It doesn’t end up doing very well
As Decrypt previously reported, experts have generally agreed that over the long-term, a spot Bitcoin ETF will probably do well.
What isn’t clear is that if approval immediately leads to an influx of capital: with so many ETFs launching at the same time, investment could be diffused over several, leading to a quiet first day of flows, experts said.
ETF Research Analyst at Bloomberg Intelligence James Seyffart told Decrypt: “It could be a flop short term and disappoint people with initial day one or two flows.”
And don’t bank on the price immediately exploding, either. Since ETF hype started last year, the price of the biggest cryptocurrency by market cap has soared—making it one of 2023’s best-performing assets. This means that gains could already be priced in.
But capital is likely to flow into the products—if approved—throughout 2024. “There is demand for these products,” Seyffart added. “There’s a reason so many issuers are trying to get a piece of the action.”
Hot Take: The Potential Impact of a Bitcoin ETF Approval
A Bitcoin ETF approval in the U.S. would mark a significant milestone for traditional retail investors who want exposure to Bitcoin without dealing with the complexities of buying and storing digital assets. While there is optimism surrounding the approval, there are different opinions on its potential impact.
If approved, multiple high-profile firms are waiting to launch their own ETFs, potentially dispersing interest across various options. Additionally, Grayscale’s popular Bitcoin Trust (GBTC) could also become an ETF, attracting volume from existing investors.
However, experts suggest that immediate capital influx may not be substantial due to the simultaneous launch of multiple ETFs. Short-term performance may disappoint some investors, and price gains may already be factored into the market due to previous hype.
Nevertheless, if approved, capital is expected to flow into these products throughout 2024 as there is significant demand for them in the market.
Disclaimer: The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
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