Welcome back to Distributed Ledger. This is Frances Yue, reporter at MarketWatch.
A U.S. federal court on Tuesday ordered the Securities and Exchange Commission to vacate its rejection of Grayscale Investments’ application to convert its Bitcoin Trust product into an exchange-traded fund.
Industry participants have been celebrating the ruling, saying it paves the way for the approval of spot bitcoin U.S. exchange-traded funds.
Read: Here’s what Grayscale’s court win means for the crypto industry
The SEC greenlighted several bitcoin futures ETF in the past, but had denied Grayscale’s application to convert its Bitcoin Trust to an ETF, and has yet to approve any ETFs that invest directly in bitcoin, on the basis that bitcoin spot markets couldn’t be sufficiently surveilled to prevent fraud and manipulation.
In this installment, I looked into what this ruling means for bitcoin ETFs, and where bitcoin may be heading to next.
Find me on Twitter at @FrancesYue_ to share any thoughts on crypto or this newsletter.
Are bitcoin ETFs coming?
While the Tuesday court ruling doesn’t mean that the SEC has to approve Grayscale’s application, it “does cement the odds-on chance of an ultimate bitcoin spot ETF approval,” analysts at QCP Capital wrote in a Thursday note.
The order doesn’t require the SEC to immediately approve Grayscale’s application, but to review the application again, and it is possible the SEC could find another rationale for rejecting it.
In June, a number of asset managers, such as BlackRock
BLK
,
Fidelity, WisdomTree, VanEck, Invesco
IVZ
,
ARK Invest and 21 Shares filed or refiled their applications for spot bitcoin ETFs.
The SEC has a set timeline to either approve or reject ETF applications. It delayed until October decisions on the applications filed by WisdomTree, Invesco, Galaxy and Valkyrie Digital Assets, according to filings on Thursday.
The agency is due to make a final decision on the bitcoin ETF filing by ARK Invest and 21 Share by Jan. 10, 2024. It faces another deadline in March to approve or deny applications by BlackRock and a few others.
Where is bitcoin heading to?
Bitcoin rallied over 7%, briefly climbing above $28,000, on Tuesday, but its gains were erased as the crypto fell back to about $26,000 on Thursday, according to CoinDesk data.
QCP analysts said the Grayscale court ruling was “an opportunity to fade the short-term knee-jerk pump” in the crypto’s price and volatility.
The analysts expect bitcoin to continue to trade sideways in the fourth quarter, with optimism around bitcoin ETFs likely to fade and a lack of innovation in the crypto space compared with other tech sectors also a drag.
However, bitcoin is likely to rally in the first quarter of 2024, the analysts noted, since a bitcoin ETFs will likely be approved in March 2024, while bitcoin halving, an event that has historically boosted bitcoin’s price, is expected to happen in April or May next year.
Read: Bitcoin halving events helped crypto rally before, but maybe not this time
Bobby Zagotta, chief executive at Bitstamp USA, was also upbeat about the start of next year. Investors may expect more regulatory clarity and greater participation in the digital asset space in 2024, which could lay the groundwork for a bitcoin rally, Zagotta said in a call.
Crypto in a snap
Bitcoin
BTCUSD
gained 2.4% in the past seven days and was trading at around $26,113 on Thursday, according to CoinDesk data. Ether
ETHUSD
advanced 1.5% during the same period to around $1,652.
Must-reads
- Elon Musk’s X Has Licenses in Multiple U.S. States to Process Payments, Including Crypto (CoinDesk)
- The ‘Fidelity Mafia’ Behind Big Crypto (The Wall Street Journal)
