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Anticipation of Bitcoin ETF Approval Sparks Optimism and Fuels Price Surge

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2023-10-25
Anticipation of Bitcoin ETF Approval Sparks Optimism and Fuels Price Surge

TL;DR

- Multiple factors are driving optimism for Bitcoin ETF approval, which includes

(1) Grayscale's legal victory against the SEC,

(2) BlackRock's Bitcoin ETF listed on DTCC,

(3) the narrowing of the GBTC discount, and

(4) the congressional pressure on the SEC.

- The optimism propelled Bitcoin price to over $35,000, its highest point in 18 months.

What is a Bitcoin ETF?

A Bitcoin Exchange-Traded Fund (ETF) is a financial product designed to track the price of Bitcoin, just like a traditional ETF does with stocks or commodities. It provides investors with an easy and regulated way to gain exposure to the world of cryptocurrencies, particularly Bitcoin. The key difference is that a Bitcoin ETF can be traded on traditional stock exchanges, making it accessible to a wider range of investors.

A Bitcoin ETF would allow investors to gain exposure to Bitcoin without directly owning the cryptocurrency. This accessibility to a wider range of investors, including institutional players, has long been seen as a potential catalyst for the growth of the cryptocurrency market. Unlike traditional Bitcoin investments, which require the purchase and custody of actual coins, an ETF would make it as easy as buying a stock.

To learn more about ETFs and crypto ETFs, click here.

The Bitcoin ETF Saga

The journey to bring a Bitcoin ETF to the US market has been a long and arduous one, marked by regulatory hurdles, debates, and uncertainty. For more than a decade, the U.S. Securities and Exchange Commission (SEC) has consistently rejected all BTC EFT applications on the grounds of volatile market, fraud, and investor protection.

In June 2023, BlackRock, the world's largest asset manager, submitted an application for a spot Bitcoin ETF, fueling optimism for a Bitcoin ETF. BlackRock's action encouraged other institutions to resubmit their Bitcoin ETF applications, and their second deadlines were supposed to occur mid-October and November of 2023.

While the crypto community eagerly awaited the ETF approval, the SEC threw a curveball by delaying the decision on one major Bitcoin ETF application from Ark21 to 2024.

However, multiple other events are boosting the optimism surrounding the approval of a Bitcoin ETF, and this positive outlook is directly influencing Bitcoin's price.

Grayscale Paves the Way with Legal Win Against SEC

The journey towards a Bitcoin ETF has been a long and uncertain one. However, recent events have injected fresh optimism into the market, beginning with a significant legal win for Grayscale Investments. In October 2023, the D.C. Circuit Court of Appeals ruled in favor of Grayscale in a dispute with the SEC. This ruling ordered the SEC to reconsider its rejection of Grayscale's application to convert its Bitcoin Trust into a spot Bitcoin ETF.

This victory was a monumental moment for the cryptocurrency industry. The court's ruling dictated that the SEC must reevaluate its initial rejection of Grayscale's ETF application. This legal win ignited enthusiasm within the digital assets community, sparking hope that a Bitcoin ETF might finally become a reality in the United States.

Congressional Pressure

Also, it is important to note that a bipartisan group of congressmen had recently sent a letter to SEC Chair Gary Gensler, urging immediate approval of spot Bitcoin ETFs. In their letter, these representatives emphasized the importance of regulatory clarity and a secure pathway for investors to engage with Bitcoin. They highlighted that without a spot Bitcoin ETF, investors might turn to riskier, unregulated alternatives.

GBTC Discount Narrowing

An interesting development in the Bitcoin market is the narrowing of the discount on Grayscale Bitcoin Trust (GBTC). When the GBTC discount narrows, it suggests that demand for GBTC shares is increasing. This discount has reached its lowest level in nearly two years, and it reflects growing market confidence as well as heightened demand. This trend suggests that investors are likely adjusting their positions in anticipation of the conversion of GBTC into a Bitcoin ETF, making the discount shrink considerably.

BlackRock's Entry Into the Arena

Another compelling factor bolstering optimism for a Bitcoin ETF is the involvement of BlackRock, specifically BlackRock's proposed iShares spot Bitcoin ETF (IBTC) appearing on the Depository Trust Clearing Corporation (DTCC).

Eric Balchunas, a senior ETF analyst at Bloomberg, pointed out the significance of the DTCC registration. He noted that it is a common step preceding the launch of a crypto ETF, and the fact that BlackRock is leading this charge indicates a strong signal that approval is on the horizon.

The timing of BlackRock's submission sets a deadline of January 10, 2024, for the SEC to make a final decision on the ETF. This timeline further stirs anticipation in the market.

Looking Ahead

Grayscale's legal victory, BlackRock's IBTC listed on DTCC, the narrowing of the GBTC discount, and the congressional pressure on the SEC for Bitcoin ETF approval are all contributing to a sense of optimism that a Bitcoin ETF is on the horizon.

This optimism has already had tangible effects on the price of Bitcoin. We witnessed a surge that took Bitcoin to its highest point in 18 months, reaching over $35,000. The price increase demonstrates the significant impact that the potential ETF approval is having on the market and indicates how eagerly investors are anticipating this new investment avenue.

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Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.