Bitcoin ETFs Await SEC’s Final Verdict Amid Mixed Signals

The U.S. Securities and Exchange Commission (SEC) is expected to announce its decision on the approval of spot Bitcoin exchange-traded funds (ETFs) soon, as the deadline for the final amendments of the applications is today, January 9, 2024. However, the regulator has recently issued additional comments on the pending applicants’ S-1 forms, raising doubts about a possible delay in the approval process.

SEC’s Comments Spark Speculation

The SEC’s comments came shortly after the spot Bitcoin ETF issuers filed applications for their revisions to reveal previously undisclosed fee structures, as required by the regulator last week. The SEC also asked the applicants to sign an agreement with an authorized participant (AP) and sort out the cash-create redemption model it favors.

The swift response from the SEC triggered speculation within the crypto community about a potential delay in the highly anticipated approvals of the Bitcoin ETFs. Perianne Boring, the CEO of the Chamber of Digital Commerce, a trade association that promotes the adoption of digital assets and blockchain technology, tweeted that the SEC’s comments are “a delay signal”.

SPOT BITCOIN ETF UPDATE: The SEC just issued additional comments on pending applicant’s S-1s. This is a delay signal. #BitcoinETF #bitcoin

— Perianne (@PerianneDC) January 9, 2024

Analysts Voice Disagreement

However, not everyone agrees with Boring’s interpretation. James Seyffart, an ETF analyst at Bloomberg Intelligence, said that the SEC’s comments show how quickly the regulator is turning these things around, and that it is “borderline unheard of” to send over a document to the SEC in the morning and get comments back the same day.

Seyffart also pointed out that the S-1 forms do not need to be complete when the 19b-4 forms, which are the actual spot Bitcoin ETF application forms, are approved. He cited the example of Hashdex, a futures-based Bitcoin ETF that was approved in 2022, and did not receive initial comments on its S-1 form until after its 19b-4 form was approved.

Really this just shows how quickly the SEC is turning these things around. Borderline unheard of to send over a document to the SEC in the morning and get comments back the same day (I think)

If they wanted to delay — the issuers wouldn’t have gotten comments back tonight

— James Seyffart (@JSeyff) January 9, 2024

Scott Johnsson, a finance lawyer, also echoed Seyffart’s view, saying that the quick comments demonstrate the SEC’s intention to push everything forward for a quick approval and launch, rather than delaying the process.

Eleanor Terrett, a Fox Business journalist, also confirmed with sources that the SEC has no intention to change the schedule, and that the decision could come as soon as Tuesday or Wednesday.

Just spoke with a couple of people who received additional comments. They say they don’t expect the SEC to change the schedule.

The SEC may notify issuers as soon as Tuesday or Wednesday that they have been cleared to launch the following week.

— Eleanor Terrett (@EleanorTerrett) January 9, 2024

Potential Impact of SEC’s Expected Approval

The SEC’s potential approval of Bitcoin ETFs would mark a crucial shift in the U.S. regulatory stance towards cryptocurrencies. Traditionally, the SEC has been more inclined towards futures-based ETFs, adopting a cautious approach to direct cryptocurrency investments.

An affirmative decision would signal a broader acceptance of crypto, potentially opening up new avenues for investment and bolstering Bitcoin’s legitimacy among traditional financial sectors, especially when established financial institutions like BlackRock and Fidelity become major Bitcoin ETF issuers.

Gabor Gurbacks, an adviser at VanEck, one of the leading Bitcoin ETF applicants, offered a tempered perspective on the immediate impact of such an event. He said that people tend to overestimate the initial impact of U.S. Bitcoin ETFs, and that he expects only about $100 million coming from mostly recycled funds from institutional investors finding its way into the market post-approval.

However, Gurbacks emphasized the long-term potential, drawing parallels with the history of gold investment. He said that people tend to underestimate the impact of spot Bitcoin ETFs in the long run, and that gold is worth studying as a parallel.

In my view, people tend to overestimate the initial impact of U.S. Bitcoin ETFs. I think maybe a few $100mm flows (mostly recycled) money.

Long term, people tend to underestimate the impact of spot Bitcoin ETFs. If history is any guide, gold is worth studying as a parallel.

— Gabor Gurbacs (@gaborgurbacs) December 31, 2023

As the market awaits the SEC’s final verdict, Bitcoin’s price has soared to $45,000, marking its highest point since April 2022. With growing investor anticipation and enthusiasm, Bitcoin is currently trading at $45,435 at the time of writing according to CoinMarketCap, up by more than 7% from 24 hours ago.