Bitcoin ETF News & Rumours
The Blockchain Sector 2023-07-13
Disclaimer: I hold funds in Coinbase stock, Bitcoin and other digital assets which creates a bias with the information shared. Not a financial advisor, not financial advice.
Earlier today Jacobi Asset Management announced that its spot bitcoin ETF (exchange traded fund) is set to list on Euronext by the end of July. This will be the first European spot BTC ETF which puts pressure on US regulators where the real drama is.
The SEC is the US regulator responsible for protecting investors and implementing securities laws. In reality they have been criticised for protecting Wall Street and working in the interests of traditional finance giants.
For the last six years various companies in traditional finance have had applications for a spot Bitcoin ETF refused or delayed by the SEC. In June 2023 BlackRock, the worlds largest asset manager with over $9T in AUM, started their application for a Bitcoin spot ETF. This was unusual timing as the SEC had just the previous week launched litigation against Binance & Coinbase.
BlackRock has a direct line of communications with the SEC, so this raised some questions as to whether they had some kind of heads up from the regulator that now might be a good time to file for a Bitcoin ETF.
A whole host of other applicants then updated or reviewed their filings before and after the SEC stated they were inadequate “aren't sufficiently clear and comprehensive”.
Every firm then updated their filings to name Coinbase, the very same company the SEC had just sued, as the settlement provider for the ETF.
That makes no sense unless the SEC has communicated that it wants Coinbase, a US public company, to be involved in the future. Perhaps the SEC is using the litigation to leverage a deal for data sharing and cooperation with Coinbase, while playing king maker to the industry. Coinbase share price has rallied on the news and is threatening to break out of the range it has been in since May.
Why Is A Spot Bitcoin ETF Important?
A spot Bitcoin ETF would act as a bridge between crypto and traditional finance. Every hedge fund, family office and sovereign wealth fund has access to US stock exchanges where ETFs trade.
It would make investing in Bitcoin much easier for tradfi with the perceived safety and market access provided by an ETF wrapper.
On to the rumours... I’ve heard on good authority that if a Bitcoin spot ETF goes live it would likely be the fastest growing ETF product of all time. This is why companies like Blackrock, Fidelity, Ark, Invesco and WisdomTree all want approval, there is demand to be met.
Spot ETFs hold Bitcoin in equal amounts to the funds AUM. The rapid growth of these products would create huge buying pressure which is getting crypto Twitter excited.
Here are the current top ETF’s by AUM, the total market has over $7T invested in ETF’s.
SPY - $367 billion
IVV - $303 billion
VOO - $269 billion
VTi - $267 billion
QQQ - $172 billion
There is potential to create demand for Bitcoin in the 9 figure range over the next few years. I would suggest that this could be the catalyst which leads to the next bull run.
For comparison MicroStrategy has spent around $4.2 billion on Bitcoin to date, just over 1% the USD amount held in the largest ETF.
When Will A Bitcoin ETF Be Approved?
Unfortunately no one knows for sure but we can speculate on a few possibilities.
Assuming there are no external influences the SEC could potentially wait for a settlement with Coinbase, putting time pressure on the exchange to comply with their demands.
Coinbase would benefit from the ETF approvals because it would get all the tradfi trading volume which would then increase liquidity, attract market makers and traders, further increasing the liquidity on exchange.
Potentially this could be the tipping point that enables them to compete with Binance for the position as the worlds leading digital asset exchange while the SEC continues it’s litigation against Binance.
This aligns Coinbase and the SECs interests to get a deal done, approve the ETFs and work together going forwards. The SEC gets the power to regulate the exchange and industry while attempting to destroy the competition.
I believe it’s likely the regulator approves the majority, if not all ETFs in due course. It would be scrutinised for bias if it approved just BlackRocks ETF while denying or delaying companies like VanEck who have been waiting for approval since their original application in 2017.
Things will likely move fast due to the competitive nature of the finance industry. We could see all the major asset managers launch Bitcoin products and start marketing campaigns imminently following approval, in a race to attract investment.
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