The Securities and Exchange Commission (SEC) may be on the verge of granting approval for the eagerly awaited spot Bitcoin exchange-traded fund (ETF) in the upcoming month, according to insights from Steven McClurg, the Chief Investment Officer at Valkyrie.
Bitcoin’s value has seen a significant surge over the past few months, driven by the anticipation of a green light for the spot ETF, with its price doubling since the beginning of 2023.
In contrast to the existing Bitcoin futures ETFs, which rely on derivatives contracts, a spot Bitcoin ETF directly holds the digital currency. Prominent financial institutions such as BlackRock, Fidelity, ARK Invest, and Grayscale have submitted applications to provide spot Bitcoin ETFs, marking a significant shift after years of the SEC’s reservations, primarily related to concerns about potential manipulation and the availability of reliable pricing sources.
Spot Bitcoin ETF to Fully Launch in February 2024
McClurg anticipates that the SEC will issue a second round of comments to the applicants in the coming weeks, possibly leading to the approval of rule changes by the end of this month. He suggests that if approval is granted in late November, it could pave the way for a fund launch in February.
“Before any further steps, we’ll receive a second round of comments, and I believe we’re likely to see those comments within the next one to three weeks,” McClurg stated in an interview on Thursday, following Valkyrie’s revision of its own spot Bitcoin ETF application.
He added, “A late November approval would probably result in a February launch,” emphasizing that firms would still need to submit registration forms once the rule changes are authorized.
The SEC is currently evaluating 8-10 applications for spot Bitcoin ETFs. Recent amendments to these applications have addressed issues related to risk disclosures, the sources of underlying benchmarks, pricing methodologies, custodial arrangements, and other specific details in response to SEC requests. McClurg believes that the lengthy debate regarding market manipulation and custody concerns has largely subsided. However, some experts caution that these factors, particularly the potential for manipulation, may still present obstacles.
Approval Could Unlock Billions in New Investments
McClurg envisions that up to $10 billion could pour into spot Bitcoin ETFs within the first 1-2 months following their launch. Matt Hougan, the Chief Investment Officer at Bitwise Asset Management, offers a more optimistic estimate, suggesting that these new funds might attract over $50 billion in cumulative inflows over a five-year period, with a focus on the later years.
While there is a prevailing sense of optimism surrounding the SEC’s impending approval, Hougan advises caution until the filings receive full approval, likening the situation to being in the “red zone” in a football game and raising the question of whether the final goal line can be crossed.
Prominent financial institutions have long pressed the SEC for approval of spot Bitcoin ETFs, and past applications were consistently denied due to concerns about market manipulation and pricing. McClurg argues that these concerns have largely been addressed over the years, citing the recent settlement of a manipulation lawsuit involving Genesis Global Trading and the Grayscale Bitcoin Trust as an indicator of diminishing manipulation challenges.
At present, investors eagerly await the SEC’s next steps. With Bitcoin prices surging and heavyweight investors showing interest, the demand is unmistakable. Approval could potentially unleash a significant influx of new investments into the cryptocurrency market.
