Bitcoin ETFs are around the corner. But are they? For the past few months, the crypto community has hedged their bets on the SEC approving applications from TradFi leaders that promise to bring traditional money into the Web3 world. As a result, Bitcoin surpassed its elusive $40K mark and is seemingly headed for even higher ground.
However, as excitement intensifies, so does anxiety. We’ve already extensively been over how the market will react upon Bitcoin ETF approvals (spoiler alert: bulls win) but how bullish should we be on approvals actually being granted?
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Bulls: “It’s done”
Bloomberg predicts a 90% chance of approval by 10 January, which is two days away from the time of writing. For some, the battle has already been won.
SkyBridge Capital CEO and 10-day White House communications director, Anthony Scaramucci, bullishly tweeted “It’s done” on Friday, leaving many to speculate the regulators have given the green light.
Grayscale Chief Legal Officer, Craig Salm also encouragingly tweeted, “Just filling out some forms.”
Meanwhile, online punters on blockchain-based betting platform Polymarket are leaning towards approval with 84c for a yes bet and 18c for a no.
Bloomberg analyst James Seyffart initially predicted a 90% chance of approval but has since upped the odds to 95%.
In terms of admin, the paperwork for the approvals has reached its final stages. Those seeking ETFs were told by the SEC to submit a final version of a document known as 19b-4 filings, which present suggestions for rule changes on stock exchanges to enable the trading of ETFs.
Issuers are also waiting for the SEC to sign off on the final versions of their S-1 filings, which state the key information about their proposed ETFs. Typically, S-1 approval will only come after 19b-4s approval.
If both are approved, Bitcoin ETF treading could commence as soon as the following business day.
19b-4 amendments were filed for spot BTC ETF applications from Blackrock, Valkyrie, Grayscale, Bitwise, Hashdex, ARK 21Shares, Invesco Galaxy, Fidelity, Franklin Templeton, VanEck, and WisdomTree.
Bears: “No reason to approve”
Amid all the excitement, market skeptics are feeling less optimistic about the SEC playing ball.
In a post titled “Why the SEC will REJECT Bitcoin Spot ETFs again,” crypto research platform Matrixport argued last week that the SEC has “no reason to approve” these ETFs.
“While we have seen frequent meetings between the ETF applicants and staff from the SEC, which resulted in the applicants refiling their applications, we believe all applications fall short of a critical requirement that must be met before the SEC approves,” Martrixport states. “This might be fulfilled by Q2 2024, but we expect the SEC to reject all proposals in January.”
“SEC Chair Gensler is not embracing crypto in the US, and it might even be a very long shot to expect that he would vote to approve Bitcoin Spot ETFs,” the research firm adds. “He still sees this industry in need of more stringent compliance. From a political perspective, there is no reason to approve a Bitcoin Spot ETF that would legitimize Bitcoin as an alternative store of value.”
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If correct, Bitcoin could fall as much as 20% “very quickly” to the $36,000/$38,000 range, Matrixport believes.
Mati Greenspan, the Founder and CEO of Quantum Economics, agreed that SEC Chair Gary Gensler would unlikely disappoint his allies by approving an ETF.
“I doubt very much that Gary Gensler is going to approve any kind of crypto-related ETF. I think if it’s within his power, he’s going to do anything he can to delay the crypto innovation in favor of the big bankers that is beholden to,” Greenspan said earlier this month.
Data also supports this skepticism. According to a Bitwise survey, “only 39% of advisors believe a Spot Bitcoin ETF will be approved in 2024.”
LESS THAN HALF OF ALL ADVISORS EXPECT A SPOT BITCOIN ETF IN 2024…
In a surprising development, only 39% of advisors believe a spot bitcoin ETF will be approved in 2024. By contrast, Bloomberg ETF analysts peg the likelihood of a January approval at 90%.
— Bitwise (@BitwiseInvest) January 4, 2024
Although the SEC is facing pressure from the crypto industry to approve these ETFs as soon as possible, some are advocating for the regulator to reject them.
Dennis Kelleher, CEO of the nonprofit Better Markets, sent an 11-page letter to the SEC stating that approving Bitcoin ETFs “would be a grave if not historic mistake almost certainly leading to massive investor harm.”
“The massive and unrelenting fraud and manipulation in the Bitcoin market means that approving these products would expose those investors to the very harms that the SEC exists to prevent,” Kelleher argued.
Market commentator Greekslive described the approval of these ETFs as becoming “less and less likely.”
“Weakness in crypto mining stocks, and the sell-off in several crypto-related U.S. stocks, also reinforced the market’s skepticism,” Greekslive said on X, arguing that options market data suggests that institutional investors are “not very bullish on the ETF market.”
The likelihood of the ETF’s passage became less and less likely, and the market saw a stalemate. Weakness in crypto mining stocks, and the sell-off in several crypto-related U.S. stocks, also reinforced the market’s skepticism.
ATM option IV plummeted to 52% for the week and… pic.twitter.com/orjr1Wcwwf— Greeks.live (@GreeksLive) January 3, 2024
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