So far, the SEC has rejected every spot market bitcoin ETF put before it, basically because it believes the bitcoin market can be easily manipulated.
But according to Bloomberg’s senior ETF strategist Eric Balchunas, BlackRock actually has a 50% chance of getting its spot Bitcoin exchange-traded fund greenlit by the securities agency. This is because Grayscale is more likely to win its lawsuit against the SEC.
The First-Ever Spot Bitcoin ETF?
$9.5 trillion asset manager BlackRock recently sought permission from the U.S. Securities and Exchange Commission to list a spot bitcoin ETF, giving its clients indirect exposure to the flagship cryptocurrency. The main reason behind the hype is mostly related to the investment giant’s ETF application approval rates. Notably, BlackRock boasts a 575-1 record when it comes to its ETF applications.
Bloomberg’s Eric Balchunas gives BlackRock’s spot BTC approval chance of 50%. Balchunas’s forecast follows an observation made by the senior legal analyst for Bloomberg Intelligence, Elliott Stein, who believes the chances of Grayscale defeating the SEC in the ongoing lawsuit are at 70%.
Balchunas noted that the SEC might give BlackRock’s ETF filing the go-ahead as a way to “save face” by authorizing an ETF from a “trusted ‘adult’ TradFi” company instead of Grayscale. This means that this may be the first spot bitcoin ETF out the door.
As you might recall, Grayscale launched a legal challenge after the SEC rejected its application to convert its Grayscale Bitcoin Trust (GBTC) spot into a Bitcoin ETF. On March 7, a panel of judges heard oral arguments of the two sides in the suit. According to Stein, Grayscale’s chances of emerging victorious in the lawsuit increased from 40% to 70% because “all three judges on the panel appeared to side with Grayscale” based on their “lines of questioning”.
“The SEC and chair Gary Gensler may be bracing for a loss and looking to preemptively soften it or make it meaningless by approving a spot Bitcoin ETF application before or around the same time as the court decision,” Stein added.
Although the lengthy and extenuating legal war with the SEC seems endless, BlackRock’s impeccable track record for ETF applications injected a breath of fresh air into GBTC’s share price, which currently trades at $19.18, as per Google Finance.
The SEC’s Spot ETF Kill Streak
SEC Chairman Gary Gensler, known for having lectured a Bitcoin and Blockchain course at MIT, has been a staunch adversary of the crypto industry.
Numerous investment managers have filed for spot crypto ETFs in the past, and have been shot down by the SEC, one after another. Many of these firms are now reapplying for ETFs, hoping that Blackrock’s filing will pave the way for a more friendly SEC.
New York-based asset management firm WisdomTree is seeking approval from the SEC to list its “WisdomTree Bitcoin Trust” for a third time. A few hours after the WisdomTree filing, Invesco, another major investment company with as much as $1.49 trillion under its management as of May 2023, “reactivated” its application for a similar investment vehicle, followed by a request from Valkyrie Investments on June 21.
If the SEC ultimately greenlights the applications from these asset managers and the likes of Fidelity Investments, JPMorgan, Morgan Stanley, Goldman Sachs, BNY Mellon, and Bank of America seeking to offer similar services to investors, the crypto market would be opened up to companies with a combined $27 trillion in assets under management.