After a federal judge rejected the Securities and Exchange Commission’s argument for refusing one such product on Tuesday, the launch of a spot Bitcoin exchange-traded fund appears to be a real conclusion.
The judgement was one of the most anticipated of the year, and it will have far-reaching repercussions for the crypto business, whether as a Bitcoin extractor or miner. It is also important for established corporations like BlackRock (BLK), Invesco (IVZ), and others that have been itching to go into digital assets.
Following the announcement, the price of Bitcoin increased by more than 7%. Coinbase Global (COIN) and Marathon Digital (MARA) saw their stocks rise by 15% and 29%, respectively.
While the prospect of a Bitcoin ETF undoubtedly benefits the token business, there is reason to question whether the decision will be as game-changing as the market response implies. For one thing, the SEC may still resist or at least postpone the launch of a Bitcoin ETF if it so desires.
A unanimous panel of judges in the United States Court of Appeals for the District of Columbia Circuit ruled that the SEC behaved arbitrarily and capriciously in dismissing Grayscale Investments’ petition to convert the Grayscale Bitcoin Trust GBTC (GBTC) into an ETF.
The SEC said that the Bitcoin market lacks the necessary safeguards to prevent fraud and manipulation, but the judges said the agency failed to explain why it rejected spot Bitcoin ETFs while accepting ETFs that hold Bitcoin futures.
Following the issuance of the ruling, the agency has 45 days to seek that its case be considered by a larger panel of appellate judges. The agency may possibly take the matter to the Supreme Court, though doing so would almost certainly require approval from the Justice Department.
Even if the government decides not to appeal the D.C. Circuit judgement, it has other possibilities for delaying the launch of an ETF. The government might try to reject Grayscale’s ETF conversion for reasons not addressed by the court, which would almost certainly result in another litigation. In the most severe case, the SEC may even attempt to revoke its approval of Bitcoin futures funds.
However, the SEC’s decision to allow the funds to trade seems the most likely.
“The agency and Gensler are now in a difficult situation, which may be politically untenable.The simplest solution is to approve these ETFs,” said Nate Geraci, head of the advice company ETF Store.
On Tuesday, the SEC reviewed the court’s decision to determine next steps.
Geraci predicted that spot Bitcoin ETF launches will “shatter” past ETF launch records, rendering Bitcoin futures ETFs obsolete. A spot Bitcoin ETF clearance would almost certainly enhance token values and increase income for BlackRock, Fidelity, Invesco, and countless other corporations that have sought to establish similar products.
However, the earnings may be small. As of 4 p.m. on Tuesday in New York, the price of Bitcoin had gained 7.3% in the previous 24 hours to $27,900, giving it a total market worth of nearly $543 billion. Even if a single Bitcoin fund captured 5% of the overall market at a 0.5% yearly fee, it would only create roughly $136 million in revenue each year.
The true gold rush would be if ETF approval propels token investments into the mainstream by allowing financial advisers, Bitcoin extractor or miners, and other institutional investors to hold the token in a familiar wrapper that trades on exchanges. NYDIG, a cryptocurrency trading business, reportedly projected that a Bitcoin ETF might generate $30 billion in additional demand for Bitcoin.
However, even that argument has flaws. The most successful Bitcoin futures ETF, ProShares Bitcoin Strategy (BITO), had a spectacular beginning but has only amassed roughly $940 million in assets.
The ruling has distinct ramifications for Coinbase Global (COIN), which finished Tuesday at $84.70, up roughly 15%. Separately, the SEC sued Coinbase in June, saying that it conducts an unregistered securities exchange, which the firm disputes.
This dispute concerns whether certain of the platform’s products and tokens are securities that should be registered with the SEC. Nonetheless, Coinbase Chief Legal Officer Paul Grewal stated in an interview that the GBTC ruling provides some support.
Grewal remarked that it clearly indicates that the SEC has to reconsider its enforcement policies and application review procedures with regard to all things related to digital assets.
Grewal added that the opinion’s tone is that the SEC has once again acted contrary to law in an arbitrary manner and without any real regard for applying or even developing common rules, common standards that all parties are held to. He and his team think that theme is very consistent with our case.
The Coinbase lawsuit might take years to resolve, but for now, the trend is definitely in crypto’s favour.