Firms have now applied to the Securities and Exchanges Commission for spot-based ETFs after the futures Bitcoin ETFs were approved. The regulatory regulator has not approved spot ETFs as they are different from their short and futures counterparts. As more applications for spot-based bitcoin ETFs are rejected by the SEC it has raised questions about when the market might see one.
Grayscale and Bitwise Applications Rejected
The anticipation built over the past month regarding Bitwise and Grayscale’s spot-based Bitcoin ETF filings. Grayscale had submitted its application last year. The SEC delayed its decision several times but the firm remained determined to seek approval for a spot Bitcoin ETF. Last week’s final decision was made and the result was not as positive as predicted by experts.
Grayscale received a rejection for its application, but that was just one. Bitwise also filed for a spot BTC ETF, and it was also rejected by the SEC. This was to make its Grayscale Bitcoin Trust (GBTC), a spot-based ETF. This fund, which currently has $12.35 Billion in assets, is the biggest bitcoin trust. It is now looking for the next step.
Mounting Support For Bitcoin At $19,000 As Market Ushers In A New Week| Mounting Support For Bitcoin At $19,000 As Market Ushers In A New Week
Grayscale quickly filed a lawsuit against SEC after the rejection. The suit claimed that Grayscale has no basis to deny the application. Michael Sonnenshein, CEO of Grayscale, lamented the fact that the SEC had green-lighted four futures bitcoin ETFs in less than one year but had refused to approve any spot-based BTC ETF, accusing them of “acting arbitrary and capricious.”
Grayscale discount grows | Source: Arcane Research
The SEC however stated that they rejected the application due to concerns about market manipulations on the Bitcoin spot markets. This includes the role of the stablecoin, Tether, in these market manipulations, as well as the lack of regulation and oversight in the market.
Bitwise, on the other side, hasn’t made any moves following the rejection. He seems to just be taking it all on the chin.
Do You See a Spot Bitcoin ETF in the Future?
A spot-based Bitcoin ETF has now been rejected. It is possible that the SEC could delay granting approval for these ETFs by almost two years, or approximately 18 months. Contrary to market forecasts in 2021, it’s unlikely the market will have a spot-based BTC ETF.
BTC Holdings Shaky Above $20,000 Source: BTCUSD at TradingView.com| Source: BTCUSD on TradingView.com
Grayscale, however, has not reneged on its vision to make the GBTC a spot-based ETF. Although the lawsuit is still early in stages, Grayscale CEO expressed optimism that the company would be able to make a decision within the next year.
Related reading: Institutional Investors Continue to Be Bearish As Bitcoin’s Short Inflows Reach Record Levels| Institutional Investors Remain Bearish As Short Bitcoin Sees Record Inflows
Grayscale’s GBTC still continues to trade at a heavy discount and the firm’s annual management fee is firmly at 2%. It is possible that the firm’s conversion to spot-based ETFs is denied in the coming two decades. If it fails to maintain close-ended trading, this would mean it cannot justify its current trading discount. However, with the firm’s drive to gain approval from the SEC, it is not a stretch to think that it would get it in the next 20 years.
Featured image taken from Coincu News. Arcane Research charts and TradingView.com charts.
Follow Best Owie on Twitter for market insights, updates, and the occasional funny tweet…