Regulatory Approval of a Bitcoin Spot ETF
Many in the cryptocurrency industry don’t fully grasp exchange-traded funds (ETFs), yet their potential impact could have an immense ripple effect across cryptocurrency. If approved by regulators, ETFs could encourage traditional investors to enter the market while also improving liquidity and aiding price discovery.
BlackRock and Grayscale expect the SEC to rule on their applications by Jan. 10, while others such as ARK Invest and 21Shares also seek spot bitcoin ETFs.
Goldman Sachs Emerges as a Potential Authorized Partner for BlackRock and Grayscale’s ETFs
Goldman Sachs has entered advanced discussions to become one of the key participants in two leading spot Bitcoin ETFs, marking an important step on the road toward mainstream adoption of digital assets. BlackRock, one of the world’s premier asset managers and Grayscale Investment Firm are expected to participate in these new offerings, with cash-backed ETFs expected as a way out from regulatory barriers that have plagued this space.
Authorized participants (APs) are financial institutions responsible for creating and redeeming ETF shares, ensuring they track accurately with the price of their underlying assets. Goldman Sachs is in talks to become an authorized participant for both BlackRock’s upcoming spot Bitcoin ETF as well as Grayscale’s conversion of their market-leading Bitcoin Trust to an ETF – a potential new opportunity for their involvement in crypto.
Upon approval, Bitcoin ETFs would become the first direct exposure to its price. Existing ETFs that track this market include futures contracts and stocks from companies with significant businesses in cryptocurrency industry – although their high management fees turn many investors off.
These new ETFs, currently under review for approval, will also be the first ETFs backed by traditional finance firms. Investors anticipate many more finance giants will step forward as potential authorized participants; each ETF should feature five to 10 APs.
Next week, the Securities and Exchange Commission (SEC) is set to make their decisions regarding multiple ETF applications, with much anticipation among digital asset industry members that the SEC may reject all of them. Although recent speculation suggests otherwise, market sentiment remains optimistic ahead of Wednesday’s deadline and with Goldman Sachs playing such an instrumental role as well as providing credibility through their involvement could help overcome regulatory challenges which have hindered previous efforts; other finance giants may emerge as possible contenders as the SEC considers many ETF applications during these next days as the SEC considers so many applications as soon as this week.
Bitwise Raises the Stakes
BlackRock and Grayscale have submitted applications with the SEC for spot bitcoin ETFs, while Bitwise has made waves by raising over twice BlackRock’s seed investment amount and securing two times larger investors than their rivals. With such an investment on offer, Bitwise could potentially attract larger investors than rivals BlackRock and Grayscale combined.
Launching a Bitcoin ETF could give mainstream recognition to this asset that financial advisors commonly view as high-risk. An ETF provides investors with diversification while at the same time mitigating risk. A recent survey indicated that 72% of financial advisors would be more inclined to invest in crypto if ETFs were approved – see for more.
Spot bitcoin ETFs store actual bitcoins in a secure digital vault managed by registered custodians, giving investors exposure to its price without needing an exchange account or wallets – something some experts recommend limiting in a diversified portfolio.
Though some long-term bitcoin holders, known as “HODLers,” may choose to sell when prices rise, others remain loyal and continue holding onto their coins, creating an imbalanced supply situation and increasing prices in turn.
SEC approval of a spot bitcoin ETF could bring in institutional investors and help the cryptocurrency achieve mass adoption and boost its value, yet rising risk-free rates and declining household finances might thwart such plans.
The SEC will take its time reviewing ETF applications. But they expect a decision by this year; once approved, these ETFs would be listed on national securities exchanges and tradeable by investors. While 13 spot bitcoin ETFs have already been submitted for review by them agency, another dozen or so have also been filed with them and will go through this same review process.
VanEck Pledges 5% of Future ETF Profits to the Bitcoin Core Developers
VanEck recently sent out an unambiguous signal of its commitment to the Bitcoin ecosystem by pledging 5% of profits from its spot ETF if approved by the SEC to supporting core developers of Bitcoin network, an action which is critical in maintaining its longevity. This generous gesture shows their dedication and will allow these core developers to continue providing innovation, security, and resilience improvements within its ecosystem – vital factors to its future sustainability.
Many in the community have welcomed this move with excitement, with one individual noting it is “an important milestone in the integration between traditional finance and open source cryptocurrency ecosystem.” In addition, developers’ roles as integral parts of cryptocurrency adaptability and sustainability were recognized – further contributing to mainstream adoption.
Launching a spot ETF could draw in capital from institutional investors and improve market liquidity while expanding investment options in digital assets. But introduction of spot ETFs does not come without risks such as potential price volatility and third-party custodianship concerns.
As such, investors are advised to exercise extreme caution when investing in Bitcoin ETFs, considering all risks thoroughly before making their decision. Furthermore, individuals should maintain control over their own bitcoin keys in order to prevent risking losing control over digital assets that belong to them.
As large money management firms await SEC approval of their applications for a spot bitcoin ETF, the cryptocurrency market has become anxious. Analysts remain hopeful that early January will witness history being made by approving a first spot ETF; existing funds may shift into the space rather than Wall Street capital flowing in through new offerings, potentially leading to overheated conditions similar to what occurred following CME Futures-backed BITO launch last year which caused rapid price rally and sell-off; although it’s unlikely such launches would initiate extended price slump as seen last time due to lack of regulation by Wall Street players being kept out by existing funds instead.
Ark Invest and 21Shares File 19b-4 Applications
As investors become more confident that the Securities and Exchange Commission (SEC) will approve spot bitcoin ETFs, their activity surrounding this potential approval has continued apace. Many of the remaining 11 firms are racing to make necessary modifications as soon as the Jan 10 decision date approaches.
BlackRock, ARK Invest and Grayscale Investments all recently submitted final updates to their 19b-4 amendment applications, in particular by permitting cash redemptions instead of restricting withdrawals to bitcoin withdrawals only. They also highlighted their strategic alliance (SSA) agreement with cryptocurrency exchange Coinbase as a factor that might increase chances for approval.
21Shares filed an amended registration statement on Monday to unveil its fee structure and authorized participants, or APs. Their fees are significantly lower than other rival funds and will even waive for six months or until reaching $1 billion in assets. They have chosen Jane Street Capital, Macquarie Capital and Virtu America as APs.
Though these last-minute changes appear promising, it remains uncertain whether any will persuade the SEC to approve bitcoin ETFs. According to reports, SEC staff advised applicants that more information must be provided regarding market manipulation risks associated with investing in spot bitcoin markets as well as proof that bitcoin markets are sufficiently regulated and secure enough for ETF consideration.
However, if the SEC finds these modifications inadequate, it could reject and postpone making its decision until another round of deadlines. Furthermore, it could split its review in two, with one section working on exchange 19b-4 submissions while another evaluates registration statements from asset managers.
Some investors speculate that the SEC’s concerns over illicit cryptocurrency activity could persuade it to approve ETFs for bitcoin. No matter their decision, this surge of investment money should boost demand for crypto assets such as bitcoin – potentially leading to its all-time high price by 2022.