The Extended Wait for Bitcoin ETFs

The crypto world has been eagerly anticipating the approval of Bitcoin Exchange Traded Funds (ETFs), but the wait appears longer. The recent flurry of activity in this space has both raised hopes and heightened uncertainties regarding the future of these investment vehicles.

On June 15, BlackRock, the world's largest fund manager, made a groundbreaking move by filing for a spot Bitcoin ETF with the United States Securities and Exchange Commission (SEC). This marked a pivotal moment as a traditional financial giant entered the crypto ETF arena. BlackRock's application set off a trend, prompting several other financial institutions to refile their applications for spot ETFs. These key players are Fidelity, Invesco, Valkyrie Investments, WisdomTree, and VanEck. Notably, these new applications incorporated a surveillance-sharing clause to address SEC concerns.

Hurdles in the Approval Process

However, despite these advancements, roadblocks persist. The SEC found BlackRock's initial application lacking in specific details, prompting a refile that involved appointing Coinbase as its surveillance partner. Similarly, Ark Invest, in collaboration with 21Shares, revised its application, adding the surveillance sharing clause and naming Coinbase as its partner.

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Grayscale's Legal Triumph

Before the recent applications, Grayscale had requested the SEC convert its GBTC closed-end fund (currently managing roughly $17 billion) into a bitcoin ETF in October 2021. The SEC denied Grayscale's request. 

In an important legal development on Aug. 29, the D.C. Circuit Court of Appeals ruled in favor of Grayscale, a digital asset management firm, in a lawsuit against the SEC. 

As per recent reports, the SEC has chosen not to appeal the court ruling, paving the way for Grayscale's Bitcoin trust to become an exchange-traded fund. This decision marks a significant milestone in the crypto ETF landscape, creating opportunities for further approvals.

The Road Ahead

While progress has been made, the journey for Bitcoin ETFs remains uncertain. One possible delay scenario could arise if the New York Stock Exchange needs to file a new listing for GBTC. This could extend the SEC's decision-making timeline to eight months.

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A Glimpse into the Future

At least seven spot Bitcoin ETF applications are currently before the SEC. Despite being filed earlier in the year, they have faced delays and regulatory pushback, with most final approval deadlines estimated to be in March 2024 or later.

In the past, the SEC has delayed the approval of Bitcoin ETFs whose first deadline was between September 1 and September 4. SEC's second deadline is approaching, and the community will see what they do as they are scheduled from Oct. 16 to Oct. 19. For applicants awaiting SEC approval, the final deadlines are all in mid-March.

With Grayscale's success, there's a heightened likelihood of approved spot Bitcoin ETFs in the near future. According to Bloomberg analysts, the chances of approval are 75% this year, increasing to 95% by the end of 2024. 

In light of the SEC's reported willingness to permit Ethereum futures ETFs, Bloomberg ETF analyst Eric Balchunas considers revoking Bitcoin futures ETFs "highly unlikely."

This development has ignited hope among crypto enthusiasts, potentially transforming the investment landscape.