As the cryptocurrency world eagerly awaits the US Securities and Exchange Commission’s (SEC) decision on several spot Bitcoin exchange-traded funds (ETFs), the race among applicants has reached a fever pitch as investors wonder whether an approval would be a “sell the news” event.
Bloomberg’s analysts have now raised the approval odds to over 90%, signaling a potential watershed moment for Bitcoin.
In a strategic move, ETF hopefuls including BlackRock, VanEck, WisdomTree, and others just filed amended S-1 forms with the SEC to expedite the listing process following approvals.
These amendments reveal competitive sponsor fees, with BlackRock setting a fee of 0.2% initially, increasing to 0.3% after reaching $5 billion in assets.
WisdomTree and VanEck have listed their fees at 0.5% and 0.25%, respectively, This flurry of activity comes as the final deadline for the SEC’s decision looms.
What’s at Stake with a Spot Bitcoin ETF?
The value of traditional finance companies like BlackRock and VanEck launching spot Bitcoin ETFs may not be obvious on the surface but it could be a major catalyst for Bitcoin and the crypto market.
Because spot ETFs must hold the underlying asset, Bitcoin in this case, investments in these ETFs would translate to purchases of Bitcoin itself. This may not have been a big deal if there were other easy ways to gain direct exposure to Bitcoin through traditional markets but there simply aren’t any.
Currently, many of these investors don’t want to have to go through cryptocurrency exchanges that they often don’t trust (for good reason following the FTX debacle) and don’t want to worry about wallet passwords and private keys.
Once spot Bitcoin ETFs are erected, all kinds of investors who previously had little knowledge or trust in investments outside of the world of traditional finance will suddenly have a simple option for Bitcoin exposure.
This could spark a massive wave of investments from retirees, investment funds, retirement funds, stock traders, and many others, potentially driving the price of Bitcoin up.
Analysts Warn of “Buy the Rumor, Sell the News” Event
The cryptocurrency market (like all other major financial markets) is forward-thinking. Market participants make investments based on the probabilities of future outcomes that may move the market in one way or another.
This is what causes the “Buy the Rumor, Sell the News” event. Traders invest heavily in an asset expecting a positive change like an FDA approval for a company’s drug, causing its stock price to skyrocket. Then, when the actual approval is confirmed, the stock crashes because traders don’t see the price moving up as they expected and quickly sell in waves.
Some analysts are worrying that the announcement of a spot Bitcoin ETF approval from the SEC will turn out to be one of these events, causing Bitcoin and the crypto market as a whole to lose value, at least in the short term.
Martin Tillier, an analyst and writer for the NASDAQ, believes that the idea that the crypto market will pulp following an approval is underpinned by a faulty assumption; that it will spark a massive wave of institutional investment. He argues that while spot ETFs would most certainly positive for Bitcoin and would drive more investments, their impact will be much weaker than many traders expect.
Only time will tell who is right but we may not have to wait long as the SEC will likely have to either make a decision or find another way to delay it within the next few days.
The Impact of Bloomberg’s Prediction on the Crypto Market
The SEC’s historical stance of rejecting spot Bitcoin ETF applications faces a new challenge following Grayscale’s court victory in August 2023. The judge ruled in favor of Grayscale after reviewing its application to convert its Bitcoin Trust into a spot Bitcoin ETF. The decision only added pressure on the SEC, which now has a narrow window until January 10 to approve (or deny) several applications simultaneously.
Bloomberg Intelligence analyst Eric Balchunas has dramatically raised the odds for a spot Bitcoin ETF approval to over 90%, a stark contrast to the more pessimistic view of market participants on betting platforms like Polymarket.
Well said although I probably go with 5% at this point. But you gotta leave a little window open for these things.
— Eric Balchunas (@EricBalchunas) January 6, 2024
This optimistic forecast by influential analysts has the potential to drive significant movements in both Bitcoin and Ethereum prices, as a regulated ETF offering would likely attract substantial investment into these cryptocurrencies.
The crypto market has already reacted to the optimistic predictions, pushing Bitcoin and Ethereum up 6.2% and 4% respectively today at the time of writing.
The Bottom Line: A Defining Moment for Bitcoin and the Crypto Industry
The outcome of the SEC’s decision on spot Bitcoin ETFs is poised to be a defining moment for Bitcoin and the broader cryptocurrency industry.
If approved, it could mark a significant milestone in the institutional adoption of cryptocurrencies, potentially ushering in a new era of growth and mainstream acceptance for Bitcoin and Ethereum. It could also turn out to cause a painful correction if the bearish analysts are right.
As the final amendments are submitted, the crypto community watches with bated breath, ready for a decision that could reshape the future of digital assets.