The recent ruling by a U.S. circuit court in Washington D.C., ordering the Securities and Exchange Commission (SEC) to review its rejection of a Bitcoin exchange-traded fund (ETF) application by Grayscale, has generated excitement among crypto industry investors. They believe that the approval of a Bitcoin ETF by the SEC will lead to a significant surge in the price of Bitcoin and other cryptocurrency assets. Nicholas Scherling, the founder and CEO of DeCryptoFi, expressed his optimism during a round table discussion, stating that the approval of a Bitcoin ETF would cause the price to “pump quickly.”
However, despite this anticipated price surge, investors are also wary of the potential consequences of any future rejections of Bitcoin ETF applications by the SEC. Nate Geraci, the president of ETF Store and co-founder of ETF Institute, warned that a rejection in January could result in one of the “bigger rug pulls in crypto history.” Such news would likely lead to a decline in Bitcoin price and negatively impact the overall cryptocurrency market.
The SEC’s reluctance to approve a Bitcoin ETF has become increasingly apparent. It has rejected “in-kind” structured ETFs, advocating for “cash create” ETFs instead, which would potentially increase tax liabilities for ETF issuers and fees for clients. As a result, the ongoing battle between funds and regulators may further prolong the launch of a Bitcoin ETF beyond January.
Eric Balchunas, a senior Bloomberg ETF analyst, humorously commented on the current state of ETF trading fees, highlighting the potential benefits of a Bitcoin ETF. He stated that a Bitcoin ETF would “unleash the Power of One (basis point),” referring to the average 0.01% fee for ETF trading. In response, Nate Geraci predicted that it would “be a bloodbath for crypto exchanges.” The introduction of a crypto ETF could potentially eliminate high trading fees on popular cryptocurrency exchanges like Coinbase, thus benefiting investors financially.
The rejection of a Bitcoin ETF by the SEC not only affects potential institutional financiers but also has broader implications for the overall cryptocurrency market. Investors who are eagerly awaiting the launch of a Bitcoin ETF may have to exercise patience due to the SEC’s stringent requirements. Moreover, the potential increase in tax liabilities for issuers could deter them from pursuing ETF proposals, further delaying the establishment of a Bitcoin ETF.
While a Bitcoin ETF holds the promise of boosting the cryptocurrency market, it is crucial to recognize the hurdles that lie ahead. The SEC’s cautious approach reflects the need to establish regulatory frameworks that protect investors and ensure market stability. As the battle between regulators and industry participants continues, the future of a Bitcoin ETF remains uncertain. Nevertheless, crypto investors are hopeful that the SEC will eventually approve an ETF, leading to increased adoption and mainstream acceptance of Bitcoin and other cryptocurrencies.
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