Anticipating Approval of a Bitcoin ETF: A Potential Game-Changer

In a surprising and potentially game-changing development, it appears highly likely that a Bitcoin Exchange-Traded Fund (ETF) will receive approval in the United States by the end of 2023. This monumental shift in the cryptocurrency landscape has largely escaped the attention of the general public and even crypto enthusiasts who have witnessed a decade of rejections by the U.S. Securities and Exchange Commission (SEC).

The quest for Bitcoin ETF approval dates back to 2013 when the first application was submitted to the SEC, only to be subsequently rejected. Over the past ten years, the SEC has consistently denied numerous proposals, including over 30 rejections since 2021. Presently, there are ten active applications from major institutions, and it would be naive to expect more of the same rejections.

Two key developments in the past three months have significantly improved the prospects of approval. First, on June 15, BlackRock, a major asset management giant, surprisingly submitted a Bitcoin ETF application, reflecting a notable shift in perspective. BlackRock CEO Larry Fink’s positive remarks about Bitcoin and the international nature of cryptocurrencies marked a remarkable turnaround from his previous skepticism in 2017.

BlackRock boasts an impressive track record of ETF application approvals, with a staggering 99.8% success rate. Other prominent institutions, including Fidelity and Ark Invest, have since followed suit with their own applications. Their filing dates and decision deadlines align closely, suggesting a common trajectory toward approval.

The second crucial development was the August 29 federal court ruling, declaring that the SEC was wrong to deny Grayscale Investments’ filing for a spot Bitcoin ETF. While this ruling doesn’t guarantee automatic approval, it significantly strengthens the odds. The SEC now faces the task of providing robust support for further rejection, a task made more challenging by the court’s decision.

Despite a recent delay in all ETF applications, market analysts believe approval is imminent. JPMorgan analysts and former SEC Chair Jay Clayton concur on the inevitability of approval. The SEC may approve several or all of the filings simultaneously, considering their structural similarities.

The potential approval of a Bitcoin ETF in the U.S., the epicenter of global financial markets, would be a transformative event. It would introduce a new stream of investments into Bitcoin, making it more accessible to the average American investor. This shift could revitalize crypto markets, as ETFs provide a more user-friendly entry point compared to crypto exchanges, with their cumbersome KYC procedures and fund transfers.

Unlike futures-based ETFs, the spot ETFs currently under consideration would require institutions to back the ETF with real Bitcoin. This direct link between ETF purchases and Bitcoin could significantly impact its price.

In the short term, ETF approval is likely to trigger a surge in Bitcoin prices and market activity, providing a much-needed boost following a subdued summer. The long-term implications could see institutions like BlackRock guiding clients to diversify their portfolios with Bitcoin, potentially driving its price higher.

In summary, while the world may not be paying close attention to Bitcoin’s current state, the impending approval of a Bitcoin ETF could soon change that, marking a pivotal moment in the cryptocurrency’s history.