Potential Approval of Spot Bitcoin ETF by SEC In Next 48 Hours Sparks Speculation

In recent developments, Scott Johnsson, a renowned attorney from Davis Polk, has drawn attention to a potential clue regarding the approval of a spot Bitcoin ETF by the US Securities and Exchange Commission (SEC) on November 2. This speculation comes in the wake of the SEC’s decision not to contest the US Court of Appeals for the District of Columbia Circuit’s judgment, which favored Grayscale’s bid to convert its Bitcoin Trust (GBTC) into a spot Bitcoin ETF. Let’s explore the key points and implications of this unfolding scenario.

The Closed-Door Meeting:

Johnsson’s tweet unveiled an upcoming closed-door meeting scheduled for November 2, 2023. The meeting, outlined in the “Sunshine Act Notice,” is set for 2:00 p.m. ET and is not accessible to the public. The agenda of this meeting includes discussions related to the “institution and settlement of administrative proceedings” and the “resolution of litigation claims.” These topics are of great interest to the Bitcoin community, as they hold clues to the SEC’s stance on spot Bitcoin ETFs.

A Historical Perspective:

This situation bears some resemblance to events that transpired before the launch of the ProShares Bitcoin Strategy ETF (BITO) on October 19, 2021. BITO marked a significant milestone for Bitcoin, becoming the first US Bitcoin Futures ETF. Notably, it rapidly accumulated over $1 billion in assets after its launch. In the days leading up to BITO’s launch, Bloomberg reported a leak from an SEC closed meeting held on October 14, hinting that the SEC was inclined to allow the first US Bitcoin futures ETF to commence trading. This was seen as a promising development for the cryptocurrency market.

The Role of Grayscale:

With Grayscale’s spot Bitcoin ETF proposal in the spotlight, Johnsson suggests that a similar leak to what occurred in October 2021 might be on the horizon. The pressing question is whether the SEC will opt to approve Grayscale’s proposal alone or extend approval to all applicants simultaneously.

Increasing Interest and Amendments:

In recent weeks, the SEC has witnessed a surge in amendments submitted by various applicants, including BlackRock, Fidelity, Ark Invest, and VanEck. Bloomberg’s ETF experts view this as a positive sign, indicating that the approval of a Bitcoin ETF may be imminent. Concurrently, the SEC is working towards bringing all applicants to a common ground through these amendments.

Johnsson also noted that the SEC’s review process for disclosures typically takes around 2–4 weeks for a standard S-1 filing. It will be interesting to observe whether the SEC provides comments or if further amendments are submitted by other applicants in the next two weeks.

A Notable Calendar Entry:

An interesting point of reference is found in SEC Chair Gensler’s calendar dated June 15, 2023. This date aligns with the submission of BlackRock’s spot ETF application and reveals a busy schedule for Gensler, including an interagency meeting and a meeting with the Council of Economic Advisors. This marked the first such interagency meeting Gensler had in over two years as the chair of the SEC.

What If the US SEC Rejects the Spot ETF Proposal?

Despite the optimistic indicators, there are concerns that Gensler could spring a surprise and reject spot Bitcoin ETF applications. Dave Nadig suggests this could be a “Gensler semi-comedic rug-pull,” while Bloomberg’s ETF analysts, James Seyffart and Eric Balchunas, view such a decision as “remarkably unexpected.”

Impact on BTC Price After ETF Approval:

Matrixport, a cryptocurrency services provider, has confidence in Bitcoin’s potential price surge following the approval of a spot Bitcoin ETF by the SEC. According to Matrixport’s recent report, the conservative estimate places Bitcoin at $42,000, assuming 10–20% of gold ETF investors will diversify into Bitcoin. With over $200 billion invested in gold ETFs, a mere 10% shift towards Bitcoin could inject a substantial $12–24 billion into a Bitcoin ETF. Matrixport points to the Grayscale Bitcoin Trust, which reached $44 billion in assets under management at its peak, making the projection of $12–24 billion inflow plausible.

Matrixport also highlights the significant potential of the 15,000 registered investment advisors (RIAs) responsible for overseeing $5 trillion in assets. Even a modest 1% recommendation from RIAs to allocate funds to Bitcoin could result in a remarkable $50 billion influx into Bitcoin, potentially propelling its price to $56,000. These insights from Matrixport underscore the anticipation and optimism surrounding the impact of a spot Bitcoin ETF on Bitcoin’s price.

As of the time of writing, Bitcoin is trading at $34,314. The cryptocurrency community eagerly awaits the outcome of the closed-door meeting on November 2, hoping for insights into the SEC’s stance on spot Bitcoin ETFs. The evolving situation will have far-reaching implications for the cryptocurrency market and its investors.