A rise in Bitcoin ETF applications could be an early sign of the next bull run
A Bitcoin ETF will make it possible for regular individuals to invest in cryptocurrencies without actually purchasing and holding any of them. It would make it easier for more investors to keep tabs on Bitcoin values, which might eventually help the cryptocurrency sector.
How important is a bitcoin ETF going forward, especially in the long run, for the broader crypto market?
The largest fund manager in the world and a titan of conventional finance, BlackRock, submitted a spot bitcoin ETF application to the Securities and Exchange Commission (SEC) of the United States on June 15. It submitted their application via iShares, the organization in charge of managing its family of ETFs. It started a trend, and many other traditional finance and heavily invested in cryptocurrencies financial organizations re-filed for spot ETFs. These companies included VanEck, WisdomTree, Valkyrie Investments, Fidelity, and Invesco.
The new applications were different from the older ones because they contained a clause regarding surveillance-sharing. The fund management is required by the surveillance sharing to provide authorities with information on customer identities linked to trading and clearing. The action was taken to address SEC issues raised by the most recent legal actions taken against Binance and Coinbase.
According to news sources, the SEC discovered that BlackRock’s application lacked certain facts. Later, BlackRock resubmitted the application and stated Coinbase was now a partner in surveillance. With the addition of the surveillance sharing clause and the appointment of Coinbase as the partner in surveillance, Ark Invest, which submitted an application for a bitcoin ETF with 21Shares in April, modified its request. A substantial price movement in the flat and gloomy cryptocurrency market, bitcoin prices passed $0k as a result of the combined impact of major traditional finance and crypto-heavy financial organizations.
These applications will test the SEC’s resolve in the wake of the recent court decision in the Grayscale Vs. SEC litigation, which was initiated by Grayscale, even though the SEC has so far rejected all ETF applications — the first of which was submitted in 2013 by Cameron and Tyler Winklevoss. The court requested that the SEC reconsider its decision to deny Grayscale’s request to transform its bitcoin trust into a bitcoin ETF. The court found the SEC’s risk estimations for bitcoin ETFs to be dubious while nevertheless approving the Bitcoin futures ETF.
Given these developments, several industry professionals think that the SEC will immediately approve a bitcoin ETF because it is impossible to revoke its approval of futures ETFs in the past. It would be absurd if that happened. The SEC announced last month that its decision on bitcoin ETFs won’t be made until October. Given that the SEC has 240 days to accept or reject them, it may postpone making a decision until the beginning of the following year. The excitement surrounding the filings for bitcoin ETFs has gone, and the price of bitcoin has been circling between $26K and 27K levels.
What happens if the SEC approves some of these applications?
A Bitcoin ETF will make it possible for regular individuals to invest in cryptocurrencies without actually purchasing and holding any of them. It would make it easier for more investors to keep tabs on Bitcoin values, which might eventually help the cryptocurrency sector.
The US’s efforts to create a bitcoin ETF have drawn interest from around the world due to the lengthy licensing process, although bitcoin ETFs have already been introduced in Europe and Canada. The introduction of a bitcoin ETF for institutional investors in Europe underlines the region’s advancement in establishing regulations for the cryptocurrency industry. Integrating digital assets into conventional financial systems is the key issue regulators encounter when deciding whether to approve a Bitcoin ETF.
Once the Bitcoin ETF is legalized, it might make trading on the price of Bitcoin easier. By doing so, Bitcoin would be traded on the same exchange as traditional securities like equities, bonds, gold, etc. The legal and financial structure would be well-known, making it simple for traders to speculate and invest.
For starters, because of the complex technologies, hazards, and unlawful activities involved, bitcoin differs from traditional financial goods. Investors’ interests are still not protected in the cryptocurrency market, as seen by the most recent collapse of FTX, the third-largest cryptocurrency exchange in the world, which resulted in the loss of close to $10 billion in investor funds.
The intrinsic worth of cryptocurrencies is disputed by the conventional financial system as well. Stablecoins and tokens from Terra-Luna, which were connected to one another algorithmically and the Terra stablecoin was tethered to the USD, abruptly lost their ability to hold value. The incident caused a $44 billion value loss in the cryptocurrency market.
According to a Sanford C. Bernstein research estimate, if legalized, ETFs may represent 10% of Bitcoin’s market value within three years. The research also notes that the likelihood of a spot bitcoin emerging has increased in the wake of the Grayscale decision.
The US capital market has an ETF industry of $7 trillion. A piece of this huge pie can represent a lot for organizations that specialize in cryptocurrencies, such as bitcoin. US consumers have had access to Bitcoin Futures ETFs since 2021.
How the SEC interprets the court ruling in Grayscale’s complaint will determine whether it permits bitcoin ETFs. According to a recent Coindesk report, the SEC has just one week left to file an appeal against the Grayscale ruling. Analysts predict that the SEC may not file an appeal but instead choose to interfere in other ways.
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