September 27, 2023

SEC decision on Bitcoin ETFs won’t leave out Wall Street giants

The Securities and Exchange Commission’s (SEC) delay in deciding whether to approve a spot Bitcoin exchange-traded fund (ETF) in the United States is fueling expectations that a final verdict will come in a batch that includes key players on Wall Street, including BlackRock and Fidelity. 

“There’s a tremendous amount of pressure on the SEC to approve a number of these ETFs, particularly because the approved Futures backed products are lagging spot performance substantially, harming investors,” markets veteran and co-founder of CoinRoutes Dave Weisberger told Cointelegraph, adding that all pending applications will likely be included in a final decision.

The SEC is analyzing a total of eight applications for a spot Bitcoin ETF, following past delays and denials of the crypto product in recent years. Companies up for a decision are ARK Invest and 21Shares, Bitwise, BlackRock, VanEck, WisdomTree, Invesco and Galaxy Digital, Fidelity, and Valkyrie. Together, the firms manage over $15 trillion in global assets.

On Aug. 11, the U.S. markets regulator opened a 21-day comment period for the ARK 21Shares Bitcoin ETF. As per the filing, the SEC is seeking answers on whether ARK 21Shares’ proposal is designed to prevent fraudulent and manipulative acts and practices, as well as whether the Bitcoin (BTC) market is susceptible to manipulation.

Furthermore, the regulator raised concerns about Coinbase’s surveillance-sharing agreement, asking commenters to examine whether Coinbase’s participation in the ETF’s surveillance would, in fact, help to detect, investigate and deter fraud and manipulation in Bitcoin’s price.

“The SEC’s main concern about spot crypto ETFs is about the potential market manipulation by a big whale. Theoretically, it can happen if the SEC approves the ETFs of one or two investment funds. But if it decides to register all 8 ETFs, it will sharply mitigate the probability of manipulation, because these firms will be able to trade with each other frequently, taking opposite sides,” explained Ruslan Lienkha, chief of markets at YouHodler.

SEC application timeline for a spot Bitcoin ETF. Source: Bloomberg Intelligence/James Seyffart

The delay had a lesser impact on Bitcoin’s price, hovering around the $30,000 mark at the time of writing. According to Mauricio Di Bartolomeo, co-founder of crypto lending platform Ledn, traders and investors are “expecting [the SEC] to take all the time they could,” with today’s decision having a low impact “in terms of market expectations.”

The SEC still has two deadlines before a final decision is made. The third deadline for the ARK 21Shares application is due by January 2024. Valkyrie has the latest application in line, with two upcoming deadlines in January and March next year.

The BTC ETF outcome could reshape the crypto investment landscape. According to Lienkha, an approval could potentially bring over $70 billion in liquidity to the Bitcoin market. “The opportunity to invest in Bitcoin through ETFs will give regular investors more confidence, as with professional help, they don’t have to dive into all the technical details and analyze potential risks by themselves,” he noted.

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