Gorast Tasevski and Haan Palcu-Chang of Purpose Investments share thoughts about bitcoin ETFs – and Canada.
Here’s Why This Former SEC Lawyer Thinks A Spot Bitcoin ETF Isn’t Coming
Recent comments from former SEC Attorney John Reed Stark have further dampened optimism about the regulator approving any of the pending Spot Bitcoin ETF applications.
Spot Bitcoin ETF Approval Looking More Unlikely
The United States Securities and Exchange Commission (SEC) has continuously denied applications for a Spot Bitcoin ETF, and Stark has suggested that this trend isn’t going to change anytime soon as the SEC will likely deny all the pending applications due to several “compelling reasons.”
While aligning his opinion with that of Better Markets, Stark stated that the arguments laid forward in the nonprofit’s letters to the SEC “brilliantly” highlighted why the SEC would not approve any of these applications.
Better Markets had, in two separate letters (here and here) dated August 8, laid out arguments why the SEC should reject the proposed rule changes by the Cboe BZX Exchange and the Nasdaq Stock Market “to list and trade shares in Spot bitcoin-based exchange-traded products (ETP).”
According to them, the Spot Bitcoin market is known to show inflated trading volumes due to illicit practices like market manipulation and wash trading. They argue that the markets are highly concentrated and Bitcoin’s network is maintained by a “select group of individuals and entities.” All this makes any proposed Spot Bitcoin ETP susceptible to manipulation by “bad actors” and puts investors and the public interest at risk.
In their applications, these exchanges stated that CME Bitcoin futures, a regulated market of significant size, could provide the necessary data and insights relating to any fraud and manipulation in the Spot Bitcoin ETF market. Additionally, they had entered into a surveillance-sharing agreement with Coinbase as an extra measure to prevent fraud and market manipulation.
However, Better Market has labeled these measures as “wholly inadequate.” They argue that the CME Bitcoin futures market is not a “regulated market of significant size” and the surveillance-sharing agreement with Coinbase is insufficient to prevent market manipulation.
Is Crypto Regulation Now Political?
Stark believes that the “crypto-regulatory tides could shift exponentially” once the US 2024 elections take place. He noted the political divide regarding crypto and how this has also played out in the SEC’s clampdown on the crypto industry.
Related Reading: Bitcoin-Friendly Javier Milei Wins Presidential Primaries In Argentina
The SEC has been known to come on hard at several crypto firms, including two of the world’s largest crypto exchanges, Binance and Coinbase, accusing them of securities violations. However, Stark predicts that the SEC will abandon this crypto-enforcement effort and focus more on mostly fraud cases should a Republican get elected as President next year.
Although the elections are slated for November 2024 (long after the SEC might have decided on the pending Spot Bitcoin ETF applications), Stark has forecasted that a GOP-led administration could bring about the approval of a Spot Bitcoin ETF.
Want A Bitcoin Spot ETF? Then Prove BTC Is Not Manipulated, Says SEC
With multiple applications for a spot Bitcoin ETF already filed, many have continued to speculate when the SEC is likely to give its approval or otherwise. To further add to speculations, Galaxy Digital CEO Mike Novogratz, citing his sources, stated that approval was likely to come within four to six months. However, recent developments seem to suggest that the wait could be longer.
SEC Stalling?
In a release dated August 11, the US Securities and Exchange Commission (SEC) has moved to delay the ARK 21Shares Bitcoin ETF in a move that could be seen as a delay tactic by the regulator.
Cathie Wood’s ARK Invest and 21Shares had collaborated again to refile for a spot Bitcoin ETF earlier this year after the SEC rejected previous applications. Following the standard procedures, the SEC was meant to approve or disapprove the application by August 13. However, with its latest order calling for public input on ARK 21 Shares application, this deadline is consequently extended.
With this, the general public has three weeks to give further comments on the proposal, while the SEC has another five weeks to respond to any comments it may receive. Furthermore, the SEC can choose to extend the deadline by 240 days at the maximum (a move that could potentially delay a final response until Jan 10, 2024).
This news would most likely not come as a surprise to ARK Invest’s CEO Cathie Wood, as she had predicted a delay when speaking to Bloomberg on August 7. She also forecasted that the SEC might approve multiple Bitcoin ETF applications. However, nothing is certain, as the regulator could also deny all applications as it has done in the past.
Concerns Over Bitcoin Manipulation & Regulation
While the crypto community swallows the hard pill of the SEC’s latest move, some experts have called attention to the SEC’s multiple uses of the word “manipulation” in its latest release. This is worrisome, considering that the SEC had previously rejected spot Bitcoin ETF applications on the grounds of potential market manipulation.
Furthermore, the SEC’s continued reference to this word may also mean that the regulator, maybe in a bid to frustrate these applications, could ask that they prove that Bitcoin is not a manipulated asset class.
That will undoubtedly be a huge ask considering that, over time, there have been instances that raised speculations that the crypto market can be manipulated by major players. Furthermore, Bitcoin is a borderless and decentralized currency, and even if the SEC were to move to regulate its use in the US, the ETF market could still be manipulated by external activities from outside the US.
The SEC also made raised concerns about Bitcoin not having a “regulated market or significant size,” something which could hinder the approval of any spot-traded Bitcoin ETF. The agency pointed out the fact that Bitcoin Future ETFs were approved because they were regulated by the Commodity Futures Trading Commission (CFTC). Meanwhile, Bitcoin isn’t regulated by any agency.
SEC Likely to Approve Several Spot ETFs, Sparking Next Bitcoin Rally: Matrixport
If the SEC needs more time to assess the practicality of the surveillance-sharing agreements, then the bitcoin price may correct initially in mid-September, and would be the “dip to buy,” the report said.
BlackRock Insiders Give A Timeline For When The First Spot Bitcoin ETF Will Be Approved
BlackRock and multiple other fund managers filed for Spot Bitcoin ETFs back in June. Since then, speculations have abounded regarding if the United States Securities and Exchange Commission (SEC) will approve the first Spot Bitcoin ETF given its track record. But according to insiders, the first approval may not be far off.
Approval Coming Soon For First Spot Bitcoin ETF
Citing his sources at BlackRock and Invesco, Galaxy Digital CEO Mike Novogratz stated that the SEC will likely give the green light for these Bitcoin ETFs within the next four to six months. The CEO said this on an earnings call with investors where he maintained a bullish stance on the firm’s Bitcoin strategy.
“Our contacts from the Invesco side and from the BlackRock side gets you to think that this is a question of when, not if, that the outside window this is probably six months,” Novogratz said during the company’s Q2 earnings call on August 8. “And so you’re– kind of your four to six months, if you had to put a pin the tail on the donkey audit.”
During the earnings call, the Galaxy Digital CEO noted that the Spot Bitcoin ETF application by BlackRock, which happens to be the largest asset manager, has sparked a positive sentiment from institutional investors towards the foremost cryptocurrency.
He also highlighted how BlackRock CEO Larry Fink’s change of mind from being a Bitcoin skeptic to a proponent has arguably led the Bitcoin adoption charge in the asset management industry.
In 2017, Fink labeled Bitcoin an “index of money laundering.” However, the CEO of the largest investment firm in the world has since changed his stance, and Fink has advocated for Bitcoin, rightly labeling it as the first “global money.”
Competition Is Going To Be Hot
Novogratz told investors on the call that he recognizes that the competition will be hot once the various spot Bitcoin ETFs are approved. He, however, reaffirmed his company’s intention to claim a large chunk of the ETF market share. According to him, “We’re going to fight like cats and dogs to win market share once it’s approved.”
Other prominent firms that are major contenders for a Spot Bitcoin ETF include Invesco (the US fourth-largest ETF manager), Cathie Wood’s ARK Invest, Wisdom Tree (the 10th largest ETF manager), Fidelity, Grayscale, and Valkyrie.
While it remains uncertain in what order the SEC will approve these applications (or whether they will be approved together), many believe that a first-mover advantage could be key to determining which of these firms enjoy a huge chunk of the market share in the spot Bitcoin ETF industry.
That is why it isn’t surprising that Valkyrie recently filed an application to the SEC to amend its Bitcoin Strategy ETF (BTF) to include ETH futures contracts, in a move that could see it launch ahead of other firms applying for an Ethereum futures ETF.
ARK Invest’s CEO Says SEC Could Approve Multiple Spot Bitcoin ETFs Simultaneously
ARK Invest CEO Cathie Wood has sparked speculation with her recent prediction that the United States Securities and Exchange Commission (SEC) may potentially grant approval for multiple Spot Bitcoin exchange-traded funds (ETFs) simultaneously.
Deviation From The Norm For Spot Bitcoin ETFs
In a recent interview with Bloomberg on August 7, Cathie Wood shared her insight that the SEC might opt for a groundbreaking strategy by approving more than one Bitcoin ETF at the same time.
Wood’s assertion, “I think the SEC, if it’s going to approve a Bitcoin ETF, will approve more than one at once,” has captured attention, especially given her prior assurance that her firm would lead in securing approval for a spot Bitcoin ETF.
Wood’s projection deviates from the conventional practice of sequential ETF approvals. By envisioning a simultaneous approval scenario, she introduces a novel approach that could streamline the regulatory process. This potential shift aims to foster a balanced and inclusive investment landscape, catering to an expected demand of over $50 billion.
Implications For The Cryptocurrency Industry
Historically, the SEC has not granted approval for spot Bitcoin ETFs, while permitting the listing of ETFs tied to crypto futures. Wood’s forward-looking statement emerges amidst a surge in applications from major players like BlackRock Inc, Fidelity, WisdomTree, VanEck, and Invesco, all vying for the approval of similar crypto ETFs as ARK.
Wood’s forecast also emphasizes the significance of strategic marketing. Given the anticipated resemblance among various funds, Wood suggests that issuers’ marketing prowess will be crucial in setting them apart as a race for dominance is expected. This insight underscores the competitive edge sought by applicants in a rapidly evolving sector.
As Cathie Wood’s prediction reverberates through the financial realm, industry observers await SEC’s response. With a significant deadline for ARK’s application looming on August 13, amidst speculation of potential delays, Wood suggested that the deadline might pass and be extended but then the date will be eagerly waited on.
Although Ark Invest filed for its spot Bitcoin ETFs application on May 15, earlier than others like BlackRock who filed its application on June 15, this was thought to be a race for winners or losers according to Cathie’s “first in line” phrase to favor Ark Invest. However, her revised view makes the race for Spot Bitcoin ETFs and SEC ruling more interesting.
This innovative forecast accentuates the intersection of forward-thinking and regulatory dynamics, highlighting an era where digital assets are increasingly integrated within traditional financial frameworks, especially the recent push for ETFs.
Wood is known for her unwavering conviction in disruptive innovations and the companies behind them with her investment management firm ARK Invest boasting numerous high-value stocks like CoinBase Global (COIN), Tesla(TSL), and Block (SQ), among others.
Wood also reportedly bought $100,000 worth of Bitcoin years ago when it was sold for $250 apiece and the CEO revealed that she has never sold a single BTC.
Race for Ether Futures ETFs Kicks Off With 6 Firms Filing SEC Applications
As many as six entities have filed applications with the U.S. Securities and Exchange (SEC) for Ethereum Futures exchange-traded funds (ETFs) as of filing time on August 2, 2023.
U.S. Spot Bitcoin ETF Approval Clock to Start Wednesday as 8 Applicants Named on Federal Register
The clock for the SEC approval process of spot bitcoin exchange-traded fund (ETF) applications will begin Wednesday after all eight applicants, including BlackRock, were listed in the Federal Register.
SEC’s Gensler ‘Disappointed’ by Part of Ripple’s XRP Judgement, Still Assessing Opinion
U.S. Securities and Exchange Commissioner (SEC) Chair Gary Gensler said Monday he was disappointed with the court’s decision in a part of the Ripple case.
BlackRock CEO’s Turnabout on Bitcoin Elicits Cheers, Skepticism of Crypto Cred
BlackRock CEO Larry Fink’s change of heart on bitcoin could make it easier for fellow Wall Street executives to embrace cryptocurrencies, but experts warn that his favored financial instrument – the exchange-traded fund, or ETF – is an investment vehicle that’s categorically different from the core idea behind digital assets, and could push the industry in the wrong direction.
SEC Approval of Spot Bitcoin ETF Is Unlikely to Be a Game Changer for Crypto Markets: JPMorgan
Such ETFs have existed for some time in Canada and Europe, but have failed to attract large investor interest, the report said.
Valkyrie Refiles for Spot Bitcoin ETF With Coinbase as Surveillance Partner
Valkyrie Digital Assets refiled its application for a spot bitcoin exchange traded fund (ETF) with the U.S. Securities and Exchange Commission, joining asset managers including BlackRock and Fidelity in taking another stab at the process.
Probability for U.S. Approval of a Spot Bitcoin ETF Is Fairly High: Bernstein
The lack of a spot ETF leads to the growth of over-the-counter products like the Grayscale Bitcoin Trust, which are more expensive, illiquid and inefficient, the report said.
Bitcoin Bobbles, Then Returns to Perch Above $30.1K as Investors Weigh ETF Prospects, Macroeconomic Data
A hawkish Bank of England rate hike and the latest U.S. jobless claims stirred markets little. A crypto executive writes that approval of a spot bitcoin ETF is “almost certain.”
BlackRock’s Bitcoin ETF Would Be a Big Deal
And it doesn’t really matter if it’s technically a trust.
BlockFi Filed For The Coveted Spot Bitcoin ETF With The SEC
Will BlockFi be the one? The rumors are flying, apparently, the U.S. Securities and Exchange Commission will approve a spot Bitcoin ETF soon. With that in mind, the news that crypto lending platform and investment service BlockFi just filed to get one approved was met with suspicion and excitement by the Bitcoin community. Unlike the Bitcoin Futures ETF, a spot one will require the company sponsoring it to buy a huge amount of Bitcoin. This will definitely affect the price. However… BlockFi?
Related Reading | Bitcoin Futures ETF Exceeds Expectations, Trades $1 Billion On Day One
Last year, hackers targeted BlockFi and stole sensitive user data including their clients’ activity history. To add insult to injury, the hackers used a simple SIM swap to breach their security, and the company didn’t disclose the hack until days after it happened. More recently, regulators from five states accused the controversial lending platform of violating security laws with their BlockFi Interest Account product. In a statement regarding the issue, the company said:
“BlockFi’s BIAs have been the subject of recent activity by securities regulators in New Jersey, Texas, Alabama, Vermont and Kentucky, and we are in active dialogue with these regulators. We believe that our products and services are lawful and appropriate for crypto market participants, and we remain steadfast in our commitment to protect consumers’ rights to earn interest on their crypto assets.”
In any case, past performance doesn’t guarantee future results. And BlockFi could score big if they’re the chosen one. The first spot Bitcoin ETF is expected to shatter all kinds of records, but let’s not get ahead of ourselves.
BTC price chart for 11/09/2021 on Oanda | Source: BTC/USD on TradingView.com
What Do We Know About BlockFi’s Version Of A Bitcoin ETF?
Not much, actually. The project is a joint venture with investment management firm Neuberger Berman. If approved, it will trade on the New York Stock Exchange. It will “reflect the performance of bitcoins held by the Trust, less the Trust’s expenses and other liabilities.” Yes, the registration statement actually says “bitcoins,” but let’s give them a pass for now. What else does the document reveal? Well…
“Barring a liquidation or extraordinary circumstances, the Trust will not purchase or sell bitcoin directly, although the Trust may direct the Custodian to sell bitcoin to pay certain expenses. Instead, when the Trust sells or redeems its Shares, it will do so in “in-kind” transactions in blocks of [] Shares (a “Creation Basket”) based on the quantity of bitcoin attributable to each Share (…). Because the creation and redemption of Creation Baskets will be effected in in-kind transactions based on the quantity of bitcoin attributable to each Share, the quantity of bitcoin in Creation Baskets so created or redeemed will generally not be affected by fluctuations in the value of bitcoin.”
In any case, is not even close to guaranteed that BlockFi will win the coveted first spot. The amount of ETF fillings regarding Bitcoin is getting ridiculous, actually.
Who’s Next On The SEC’s Bitcoin ETF List?
The list Bloomberg Intelligence’s James Seyffart provides shows 21 hopeful spot Bitcoin ETFs and even more derivatives-based ones. That includes the BlockFi Futures ETF that the company filed for last month. Here’s the list.
Here's the current list of #Bitcoin and Crypto ETF filings with the SEC. Next big date is still 11/14/21 for VanEck's spot Bitcoin ETF. It will be either approval or denial from SEC — no more delays. https://t.co/Z8phpVlsOK pic.twitter.com/g9ayoibmQN
— James Seyffart (@JSeyff) November 8, 2021
According to the expert, the “Next big date is still 11/14/21 for VanEck’s spot Bitcoin ETF. It will be either approval or denial from SEC — no more delays.” Will VanEck be the chosen one? We’ll have to wait and see, but Seyffart feels it won’t be. He tweeted, “We fully expect a denial based on recent comments from SEC/Gensler. Would be shocked if VanEck’s filing is approved (despite believing it *should* be approved). BUT, the denial letter should give us insight into SEC’s current views/opinions.”
Related Reading | Bitcoin ETF Inflows Slow Down As Altcoins Interest Rebound
Chances are all the approved spot Bitcoin ETFs will make tons of fiat money, but the first-mover advantage in a product as anticipated as this one is worth millions of Dollars. Billions, even.
Featured Image by Chris Stermitz from Pixabay – Charts by TradingView
