U.S. Asset Managers Hopeful for Spot Bitcoin ETF Approval
U.S. asset managers are optimistic that the Securities and Exchange Commission (SEC) will approve the trading of spot bitcoin exchange-traded funds (ETFs), despite confusion caused by a fake post on the agency’s social media account suggesting approval had already been granted.
On Wednesday, the SEC will decide whether to approve an application from Ark Investments and 21Shares to launch a spot bitcoin ETF. Numerous other applications, including those from BlackRock, Fidelity, and VanEck, are also pending with the agency.
The introduction of bitcoin ETFs would be significant for the cryptocurrency market as it would provide institutional and retail investors with exposure to bitcoin without directly holding it. This could be a game-changer for the crypto industry, which has faced numerous scandals.
SEC’s Response and Investigation
The SEC has not commented on how it will rule and has stated that it cannot discuss applications. The agency quickly disavowed and deleted the fake post, confirming that its account had been compromised by an “unidentified individual” who gained control through a third party. However, insiders believe this incident will not affect the approval process.
Expected Inflows and Market Impact
Analysts predict that if approved, the ETFs could attract between $50 billion and $100 billion this year alone, potentially driving the price of bitcoin up to $100,000. Other estimates suggest inflows of around $55 billion over five years.
The potential approval of bitcoin ETFs is seen as a significant step in institutionalizing bitcoin as an asset class. Market analysts believe that the signs point towards SEC approval despite the recent hack causing temporary market volatility.
SEC’s Historical Stance and Investor Concerns
The SEC has historically rejected bitcoin ETFs due to concerns about market manipulation. However, a federal appeals court ruling last year forced the agency to reevaluate its position. Issuers have also addressed market manipulation concerns by collaborating with Coinbase Global to surveil the underlying bitcoin market.
While some investor advocates argue that bitcoin is still too immature for ETF approval, proponents believe that the SEC’s approval would legitimize bitcoin as an asset class.
“Exceptionally Risky” Warning and Criminal Associations
SEC Chair Gary Gensler has warned about the risks associated with crypto assets and their potential for criminal use. Critics of bitcoin point to the fake tweet incident as evidence of the risks involved in investing in cryptocurrencies.
“EXCEPTIONALLY RISKY”
A green light would mark a U-turn for the SEC, which for a decade rejected bitcoin ETFs due to worries they would be vulnerable to market manipulation. And while SEC Chair Gary Gensler has long said bitcoin is not a security and has taken a tough stance on the crypto industry overall, arguing many firms are flouting securities laws.
Hopes the SEC would finally approve bitcoin ETFs surged last year after a federal appeals court ruled that the agency was wrong to reject an application from Grayscale Investments to convert its existing Grayscale Bitcoin Trust (GBTC) into an ETF. That ruling forced the agency to reexamine its position.
Issuers have also tried to address the SEC’s market manipulation concerns by arranging for Coinbase Global, the largest U.S. crypto exchange, to work with two of the ETF listing exchanges to surveil the underlying bitcoin market.
Sill, some investor advocates have urged the SEC not to bless the products, arguing bitcoin is still too immature. Gensler himself on Monday warned on his personal X account that crypto asset investments “can be exceptionally risky.”
Dennis Kelleher, CEO of Better Markets, said Tuesday’s fake tweet highlighted those risks.
“This shows again why bitcoin is the preferred financial product of criminals worldwide.”
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