If Congress Fails to Agree on a Funding Bill, the Government Shutdown Could Impact Crypto
If Congress fails to reach an agreement on a funding bill by September 30, there is a possibility of a government shutdown. This could have significant consequences for the financial sector, specifically regarding the approval of exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC). The duration of a government shutdown can vary from one to 35 days, depending on the political landscape, according to NYDIG, a prominent provider of Bitcoin-related services. This could hinder the SEC’s ability to assess and make decisions on various ETF applications, particularly those related to Bitcoin and Ethereum.
Bitcoin Spot ETFs Face Uncertainty
The SEC has delayed multiple decisions regarding spot Bitcoin ETFs. These ETFs would allow investors to buy and sell Bitcoin directly through a regulated platform. Noteworthy applicants include BlackRock, Invesco, Bitwise, and Valkyrie. The recent delay by the SEC suggests that they are preparing for a potential government shutdown. As a result, the SEC now faces a final decision deadline in mid-March for these applications. Bloomberg ETF analyst James Seyffart predicts similar delays for other applicants like Fidelity, VanEck, and WisdomTree. He also suggests that the SEC might review and approve or reject all ETFs simultaneously.
Ethereum Futures ETFs Set to Launch
Futures-based Bitcoin ETFs have already been launched in the U.S., allowing investors to track and profit from Bitcoin’s price movements through regulated exchanges. While spot Bitcoin ETFs are still awaiting approval, these futures-based alternatives have gained significant popularity since their introduction in October 2021. Several issuers have recently filed applications with the SEC to launch Ethereum ETFs based on futures. These ETFs would track the performance of Ethereum futures contracts traded on the Chicago Mercantile Exchange (CME). However, there are currently no spot Ethereum ETFs being considered by the SEC.
Market Reaction
Uncertainty surrounding ETF approvals and the possibility of a government shutdown has led to a minor decrease in Bitcoin’s value, reaching $26,933. On the other hand, traditional assets experienced losses on that day, with gold declining by 0.96% and stocks decreasing as well. Moody’s recent report suggests that a government shutdown could harm the U.S. credit rating and raise doubts about policymakers’ capability to tackle fiscal issues in the future.
Hot Take: Potential Impact of a Government Shutdown on Crypto
If Congress fails to agree on a funding bill, resulting in a government shutdown, the crypto industry could face significant disruptions. The approval of ETFs by the SEC, specifically those related to Bitcoin and Ethereum, could be delayed or put on hold. This uncertainty can impact investor confidence and potentially lead to market volatility. Additionally, the launch of spot Ethereum ETFs may face longer waiting times compared to futures-based alternatives. As the political landscape remains uncertain, it is crucial for crypto investors to stay informed and monitor developments closely.
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