Delving into the Bitcoin ETF saga as regulators send mixed signals
- The approval of BTC ETFs could get further delayed in America.
- In contrast, Europe approved its first spot BTC ETF, taking the lead in terms of crypto regulation.
The U.S. SEC’s pending judgment on the Bitcoin[BTC] ETF proposals laid out by various institutions has kept traders on the edge of their seats. As U.S. regulation dawdles, Europe has given the crypto community some respite with its latest approval.
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Europe takes an optimistic approach
Despite the uncertainty around ETF approvals in U.S., Europe was more willing to give BTC a chance.
London-based Jacobi Asset Management successfully launched Europe’s inaugural spot bitcoin ETF on Euronext Amsterdam. The ETF, named Jacobi FT Wilshere Bitcoin ETF, received approval from the Guernsey Financial Services Commission (GFSC).
It will be traded using the ticker “BCOIN.” Fidelity Digital Assets ensured custody of the fund, while market-making operations are handled by Flow Traders.
Originally approved in October 2021, Jacobi chose to delay its listing plans due to challenging crypto market conditions.
The current state of affairs in America
Regulatory uncertainty still remains high in the U.S.A.
In June, BlackRock submitted its Bitcoin ETF application to the SEC, stirring renewed investor interest. BlackRock later established a “surveillance-sharing agreement” with Coinbase, to potentially influence the SEC’s consideration of ETF applications.
Surveillance-sharing agreements allow for the sharing of information about market trading activity, clearing activity, and customer identification, with little possibility of market manipulation.
Apart from BlackRock, several companies including Valkyrie and Ark Invest have crypto ETF applications awaiting SEC review as well.
What set Valkyrie’s application apart was the fact that the firm transformed their Bitcoin ETF into an ETF combining Bitcoin and Ether.
However, the SEC is still unsure of the Bitcoin spot ETF. The approval for Ark Invest’s spot ETF was delayed by the SEC for another 21 days.
The regulator has the authority to postpone all of these ETF applications for up to 240 days. And interestingly, no spot Bitcoin ETF has been approved in the U.S. so far. Only BTC futures-linked ETFs have gained acceptance.
A hurdle for spot crypto ETF approval might be the investment’s nature. Unlike Bitcoin futures-linked ETFs, a spot BTC ETF involves direct Bitcoin investment within a fund, raising unique challenges.
As a result, the SEC could extend Bitcoin ETF approval deadlines to early 2024. The SEC can utilize a maximum 240-day window to delay crypto ETF applications, potentially leading some companies to await decisions until March 2024 for filings submitted in July 2023.
Possible impact on the market
In a recent report, Bernstein, a brokerage firm, highlighted that crypto ETFs create demand in the spot market and signal regulatory approval, boosting retail and institutional flows seeking legitimacy.
Analysts noted growing interest from global asset managers in bitcoin spot ETFs and potential solutions to address SEC objections, increasing the likelihood of approval.
Bernstein predicted a significant spot bitcoin ETF market, reaching 10% of bitcoin’s market cap in two to three years. The brokerage expects cryptocurrency ETFs to gain from robust brand marketing by asset managers and distribution efforts by retail brokers and financial advisors.
According to Bernstein, fresh capital for a new crypto cycle will come from a new stablecoin supply. But traditional asset tokenizations and ETFs will also play a big role. The report pointed out that on-chain assets stayed in a $40 billion range this year. On the other hand, circulating stablecoins reached approximately $120 billion.
State of Bitcoin
According to Santiment’s data, Bitcoin maintained a steady price range at $29,400, displaying notable performance compared to equities markets such as the S&P500 this August. This departure from correlation, initiated in mid-July, has historically brought positive implications for crypto prices.
Bitcoin’s ability to maintain stability amidst market fluctuations carries various implications. Firstly, its resilience bolsters investor confidence, potentially attracting heightened participation and investment from traders.
Moreover, the positive sentiment generated by Bitcoin’s performance could contribute to enhanced liquidity in the cryptocurrency sphere, streamlining buying, selling, and trading processes.
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Additionally, regulatory considerations could be influenced by Bitcoin’s sustained resilience, challenging preconceived notions of volatility and speculative nature.
Traders turn bearish
Despite these factors, traders turned pessimistic. This was indicated by the rising put-to-call ratio which implied that many traders were betting that BTC’s prices may decline further in the near future. Investors may be adjusting their strategies to hedge against market volatility or to capitalize on potential downward price movements.