By Jake Coleman
Bitcoin (BTC) trading is accessible to individuals across the globe, as facilitated by the open protocol of Bitcoin. The allocation of significant temporal and cognitive resources towards pursuing alternative methodologies for procuring access to bitcoins is a subject of inquiry. The prevailing question pertains to the excessive enthusiasm surrounding spot market bitcoin exchange-traded funds (ETFs), as opposed to their counterparts, namely futures-based ETFs and exchange-traded products (ETPs), which have already established a presence in the market.
Actual Demand for ETFS Is at an All-Time High
However, it is noteworthy that today, in response to the unsubstantiated speculation surrounding the potential approval of BlackRock’s bitcoin exchange-traded fund (ETF), the financial markets experienced a notable increase of $2,000, followed by subsequent fluctuations. It is evident that a discernible level of latent demand exists for these conventional financial instruments, or a substantial amount of capital currently needs to be utilized, awaiting the opportunity to engage in speculative trading activities about disseminating information surrounding exchange-traded funds (ETFs).
The iShares application submitted by BlackRock is currently undergoing a thorough review process by the U.S. Securities and Exchange Commission (SEC), as clarified by the company. Observers in the financial industry were already inclined to seek out narratives about exchange-traded funds (ETFs) in light of the recently verified information that a rival ETF application submitted by Grayscale has regained relevance. This development occurred after the Securities and Exchange Commission failed to address an appeals court decision promptly.
Why Is Blackrock’s ETF Application So Important?
The significance surrounding BlackRock’s ETF application stems from its status as the foremost global asset manager, which has initiated the filing and expressed a keen interest in expanding its involvement within the cryptocurrency markets. The submission of BlackRock’s application was a significant affirmation for the entire cryptocurrency sector. Subsequent remarks from BlackRock CEO Larry Fink, wherein he posited that a non-governmental monetary asset would progressively garner greater appeal, further bolstered this sentiment.
The rationale behind the demand for a spot market bitcoin ETF arises from the notion that many individuals, organizations, and investment entities seeking to gain exposure to bitcoin currently need help. A conventional financial instrument designed to encompass the emerging bitcoin asset class would serve as a conduit for the aforementioned untapped capital. It has been projected that a substantial influx of money, potentially amounting to billions of dollars, may be directed toward a spot market bitcoin exchange-traded fund (ETF). According to prevailing theories, this proposition holds.
SEC Is in No Hurry to Accept Applications to Create ETFs
To a certain extent, the heightened attention surrounding bitcoin ETFs can be attributed to the prevailing circumstance of the investing public’s ongoing exclusion. The Securities and Exchange Commission (SEC) has consistently declined all applications for spot-based Bitcoin exchange-traded funds (ETFs) that have been submitted, commencing with the unsuccessful proposal by the Winklevoss twins in 2013.
The primary focus of the SEC’s argument has consistently revolved around the concept of market manipulation, primarily due to the relatively limited liquidity of bitcoin, which is dispersed across numerous exchanges that facilitate BTC trading. Additionally, the absence of robust market surveillance systems further compounds this concern.
The situation above persisted until last Saturday at midnight, during which the Securities and Exchange Commission (SEC) neglected to comply with a court directive to substantiate its denial of Grayscale’s bitcoin exchange-traded fund (ETF) proposal.
Grayscale, a subsidiary of CoinDesk, currently oversees a prominent closed-end Bitcoin trust, which stands as one of its pioneering and most substantial endeavors. However, the company aims to transform this trust into an open-ended exchange-traded fund (ETF). This shift primarily entails enhancing the readability of the Bitcoin investment vehicle’s shares and streamlining the redemption process for investors.
The Securities and Exchange Commission (SEC) has declined Grayscale’s filing on grounds consistent with its historical reservations about surveillance and market manipulation risks associated with all spot Bitcoin (BTC) exchange-traded fund (ETF) applications. Upon Grayscale’s appeal to a superior judicial entity, a panel of esteemed judges determined that the Securities and Exchange Commission’s rationale was deemed “arbitrary” and “capricious.”
The SEC’s inability to substantiate the heightened risk associated with spot Bitcoin exchange-traded funds, compared to the unproblematic trading of futures-based ETFs currently prevalent in the United States, was found lacking.
The statement above suggests that the application submitted by Grayscale is again under consideration, and the Securities and Exchange Commission lacks sufficient grounds to reject it for a second time. Exclamations of joy and enthusiasm are expressed. Bitcoin experienced a 4.5% increase in trading value during the early hours of Monday morning.
The discount observed on the Grayscale Bitcoin Trust (GBTC) has reached a point of minimal magnitude, marking its lowest level since December 2021. According to analysts at Bloomberg, it has been determined that there exists a 90% probability of a bitcoin exchange-traded fund (ETF) making its debut on or before January 10th.
Grayscale Has a Chance to Be a Trailblazer
The current inquiry pertains to the potentiality of Grayscale being the initial entity to gain access to the exchange-traded fund (ETF) market. As previously indicated, several established financial institutions, namely BlackRock, Fidelity, and VanEck, have entered the abovementioned market.
Considering the SEC’s perceived lack of favor towards cryptocurrency enterprises, a potential scenario exists wherein one of these previous offerings may secure the distinction of being the initial entity to be listed. Speculations suggest that SEC Chair Gary Gensler may have discreetly encouraged BlackRock to apply due to its multitude of market surveillance tools.
In an alternative perspective, the identity of the first market participant holds limited significance. The primary determinant is validating the hypothesis that introducing spot bitcoin exchange-traded funds (ETFs) will trigger a series of institutional engagement and capital allocations towards BTC.
Bitcoin enthusiasts have historically tended to deviate from accurate predictions while explicitly refraining from providing financial guidance. This includes assertions such as Bitcoin serving as a safeguard against inflation, reaching a valuation of $100,000, or attaining widespread acceptance as a global reserve currency.
The evident need for information regarding ETF developments is apparent. According to a report by Blockworks, it has been observed that the Binance BTC/USDT market, constituting approximately 8% of the daily trading volume of bitcoin, experienced a notable 7% price fluctuation within roughly 30 minutes after the dissemination of an unverified and uncorroborated tweet about the purported approval of BlackRock.
It is worth noting that the industry in question has experienced a certain degree of embarrassment due to disseminating false information. Specifically, a claim in 2022 suggested that WalMart, a prominent entity within the industry, would be accepting litecoin (LTC) as a form of payment. It is essential to acknowledge that litecoin, a project that has yet to maintain its relevance since its inception, was the subject of this claim.
The current state of the crypto markets necessitates an infusion of new capital, particularly in light of the substantial liquidation of options exceeding $100 million during the BlackRock spoof incident. Despite prevailing circumstances, there remains a prevailing sentiment among market participants that mass adoption remains a viable prospect.
The notion that the proliferation of ETFs will facilitate institutional acceptance holds merit, albeit with a tendency towards excessive enthusiasm—similar to the pattern observed with other significant cryptocurrency occurrences that are premeditated, such as the quadrennial bitcoin halvings or Ethereum’s anticipated “Merge.” Market participants have consistently engaged in speculative trading based on these events despite the expectation that an efficient market would have already factored in their impact.
The Longer an ETF Goes Unadopted, the More Interest in It Will Increase
The interest in bitcoin ETFs can be attributed, to a significant extent, to a perpetual quest for sources of optimism. Moreover, the absence of ETFs in the markets enhances their allure, akin to the industry’s persistent demand for “regulatory clarity.” This sought-after clarity is anticipated to curtail certain activities and establish a framework for future adoption, assuming any regulatory progress proves satisfactory.
The proposition at hand bears semblance to a Freudian psychoanalytical lens applied to behavioral economics. It is pertinent to acknowledge that economies are fundamentally constituted by individuals, who, in turn, possess inherent motivations and aspirations, which encompass the inclination to yearn for what remains beyond their current possession.
Crypto traders engage in the trading of cryptocurrencies, displaying a notable tendency towards enduring challenging circumstances. This observation prompts one to consider what additional substantiation is required to support this claim.
