Bitcoin ETF: the approval could signify the end of crypto winter

The inevitable arrival of institutions in the cryptocurrency space is coming through a Bitcoin ETF. They manage over $15 trillion and demand the ability to offer Bitcoin to their clients worldwide.

Key Takeaways:

• When it seemed like the U.S. was taking an anti-crypto stance, a wave of institutional companies expresses their interest in the sector.
• BlackRock, ARK, Fidelity, Invesco, and VanEck are adjusting their presentation for a Bitcoin ETF with the SEC.

The SEC’s demands on Binance and Coinbase coincide, perhaps intentionally, with the submission of several Bitcoin ETF proposals by major investment management companies such as Fidelity, BlackRock, Invesco, ARK, and VanEck, among others. Operating quietly but significantly, BlackRock is the world’s largest fund manager, overseeing nearly $10 trillion in financial assets. Not far behind in the rankings of fund managers is Fidelity, which is in the third position.

As of today, the SEC has already rejected a dozen ETF applications for Bitcoin, including a proposal from Fidelity. The significant difference in the recent applications lies in the involvement of BlackRock, which has a record of 575 approved ETFs against only 1 denied. BlackRock’s submission for a Bitcoin ETF has sparked a flurry of applications from managers in the likes of Invesco, WisdomTree, and Fidelity, which don’t differ much in terms of the documents presented by BlackRock.

ETF	Company	Date (submitted)
ARK 21Shares Bitcoin ETF	ARK + 21Shares	25/04/2023
iShares Bitcoin Trust	BlackRock	15/06/2023
Bitwise Bitcoin ETP Trust	Bitwise	16/06/2023
Invesco Galaxy Bitcoin ETF	Invesco	20/06/2023
WisdomTree Bitcoin Trust	WisdomTree	20/06/2023
Valkyrie Bitcoin Fund	Valkyrie	21/06/2023
VanEck Bitcoin Trust	VanEck	22/06/2023
Wise Origin Bitcoin Trust	Fidelity	29/06/2023

The SEC’s initial response, just days after the massive request, was to ask for a review of the submissions due to a lack of clear information regarding the custodians of the Bitcoins. Initially, this was misinterpreted by the public (and the market), causing a significant temporary drop in the value of the largest cryptocurrency.

However, over time, it has been interpreted as a call to adjust the presentation for an increasing possibility of approval. It’s worth remembering that FTX (to the embarrassment of Gary Gensler, the SEC’s chairman) used customer funds for investments through its other company, Alameda Research.

Conspiracy theories abound, highlighting the coincidental timing of submissions by the old players in the market when we understand that the SEC has been waging a war against every cryptocurrency company that crosses its path. Nevertheless, the approval of a spot ETF (there are already Bitcoin futures ETFs, but they don’t involve actual asset ownership) to these major financial entities represents both the long-awaited arrival of large capital and the desired regulatory approval for cryptocurrencies in the United States.

If the ETFs are approved, what can we expect for the price of Bitcoin?

After a request for custody adjustments in the applications for Bitcoin ETFs, the market remains expectant for the eagerly awaited response from the SEC regarding the approval of these instruments. The possibility of millions of dollars in Bitcoin demand entering the market in a ‘safe’ manner under regulatory scrutiny should, in essence, lead to an inevitable price increase.

Imagine that only a small proportion of the over $15 trillion is used to buy Bitcoins as a portfolio diversification source; it would mean a massive demand for the cryptocurrency, aside from individual investors attracted by the cause. Moreover, about 68% of Bitcoins have not moved in over a year, even with the considerable market downturns. This means that only a small proportion of Bitcoins are considered liquid for demand from these capital giants.

In addition, ETF approvals would likely bring more companies into the cryptocurrency market, potentially creating an immeasurable domino effect for the industry’s development. Alongside ETF applications, Charles Schwab, Fidelity, and Citadel have introduced EDX Markets, a cryptocurrency exchange for institutional investors. Similarly, Deutsche Bank, one of Europe’s largest fund managers and Germany’s largest, has applied to be a custodian of crypto assets.

Bitcoin ETF approval: speculations on timing

According to Bloomberg, it is estimated that responses to the SEC applications will come around January 2024. This could represent a highly favorable scenario if global inflation remains low or if governments begin reducing interest rates, a historical factor that has benefited risk assets like cryptocurrencies.

Date estimations – SEC response. Bloomberg.

Furthermore, if a crisis is averted in the U.S. and other major powers, the outlook would be excellent in conjunction with approvals within these timeframes. Let’s not forget that Bitcoin’s halving is just around the corner, scheduled for the first part of 2024, a factor that has historically led to sustained price increases in all its past cycles.

The truth is that the coming months represent a crucial turning point for the future of cryptocurrencies. The SEC is under pressure from both the public and several powerful institutions. A crossroads for cryptocurrency prices in the medium term is expected, perhaps signaling the end of one of the most ruthless bear markets in cryptocurrency history and ushering in the long-awaited bull run, which could reach unprecedented levels of adoption.