Is the Current Structure of the SEC Suitable for Approving Bitcoin ETFs?

• Although there is optimism that BlackRock’s spot Bitcoin ETF application could be the first to receive approval, an analysis by trading firm QCP Capital has dampened this optimism.
• QCP added that while institutional participation and interest in Bitcoin are inevitable, it is unlikely that spot ETFs will be given the green light due to the current structure of the SEC.
• The situation is further complicated by the generally hostile stance of current SEC Chairman Gary Gensler towards cryptocurrencies.

Many investment firms, including BlackRock, have applied for a Bitcoin ETF; is the SEC structure suitable for a spot Bitcoin ETF?

In the past week, investment management companies that have applied for #Bitcoin ETF:

✅ BlackRock
✅ WisdomTree
✅ Invesco
✅ Valkyrie

👀 It is expected that Fidelity Investments will also apply for a #BitcoinETF in the near future.

— CoinOtag EN (@coinotagen) June 23, 2023

BlackRock’s Hurdle for Bitcoin ETF at SEC

Recently, several applications for a spot Bitcoin Exchange Traded Fund (ETF) have been made. However, all of them have been rejected by the U.S. Securities and Exchange Commission (SEC), which has the authority to approve Exchange Traded Funds. BlackRock, the world’s largest asset manager, is one of the companies that applied for a Bitcoin spot ETF. Although there is optimism that BlackRock’s spot Bitcoin ETF application could be the first to receive approval, an analysis by trading firm QCP Capital has dampened this optimism.

According to QCP Capital’s assessment, a spot Bitcoin ETF from BlackRock or any other company is unlikely in the near future due to SEC Chairman Gary Gensler’s tough stance against cryptocurrencies. QCP added that while institutional participation and interest in Bitcoin are inevitable, it is unlikely that spot ETFs will be given the green light due to the current structure of the SEC.

BlackRock filed its spot ETF at the beginning of the month, and a statement from Nasdaq revealed that Coinbase Custody Trust Company will be the custodian of the fund’s Bitcoin assets, while Bank of New York Mellon will be the custodian of the fund’s fiat currency.

The Barrier of Gary Gensler

The situation is further complicated by the generally hostile stance of current SEC Chairman Gary Gensler towards cryptocurrencies. Under his leadership, the SEC has filed lawsuits against several major cryptocurrency exchanges, including the world’s largest cryptocurrency exchange Binance and Coinbase. QCP Capital’s assessment includes the following statement:

“Due to Gensler’s role as SEC chairman, we are not sure if the ETF approval will happen anytime soon. However, as we consistently state, there is a significant place for institutional BTC and ETH in the asset management world. We will take further steps in this direction in the coming months and years.”

Grayscale Bitcoin Trust is Recovering

The effects of BlackRock’s spot Bitcoin ETF have been reflected in the price performance of Bitcoin (BTC) and beyond. Grayscale Bitcoin Trust (GBTC) has experienced a significant recovery after trading at nearly 50% below BTC/USD and continues to regain lost ground. According to data, the discount of Grayscale Bitcoin Trust to the BTC spot price (discount to net asset value) reached its lowest level of 33.45% in 2023. According to QCP, Grayscale Bitcoin Trust is experiencing its sharpest recovery since the end of 2020.