- News surrounding BTC Spot ETF has always influenced the price.
- This shows that the prices of the stocks that would make up a BTC spot ETF would remain sensitive to fluctuations in the price of the coin.
During the intraday trading session on January 3, the price of the largest crypto asset by market capitalization, Bitcoin, was determined [BTC]decreased by 10%.
This decline came after the publication of a report by crypto investment service provider Matrixport.
The report states that the US Securities and Exchange Commission (SEC) may reject all applications for a spot Bitcoin exchange-traded fund (ETF) this month.
According to the analyst who wrote the report, Markus Thielen, despite the series of meetings between applicants and the regulator and the updated S-1 prospectuses filed by them, all pending applications are:
“Failure to meet a critical requirement that must be met for the SEC to approve.”
Thielen based this opinion on the current political landscape and the SEC’s general inclination towards crypto.
“An ETF would certainly help crypto in general take off, and based on Gensler’s comments in December 2023, he still sees this sector in need of stricter compliance. From a political perspective, there is no reason to approve a Bitcoin Spot ETF that would legitimize Bitcoin as an alternative store of value.”
Thielen’s report resulted in a double-digit drop in the value of BTC and the liquidation of $500 million worth of positions on derivatives exchanges within a day.
Notably, this came after a series of predictions in December 2023 about the high chances of the SEC granting its initial approval on January 10.
In a former after on
People ask me if we have changed the odds. No, we’re still sticking with a 90% approval probability on January 10th (aka this cycle), the same odds we’ve had for months (before it was cool/safe). What we’re looking forward to now: more amended/final registrations and clarity about creations in kind versus cash https://t.co/uiWgfxOfzz
— Eric Balchunas (@EricBalchunas) November 29, 2023
Another Bloomberg analyst, James Seyffart, had done the same noted that the amended Form S-1 filed by asset manager BlackRock could motivate the SEC to approve BlackRock’s ETF application in early January.
UPDATE: @Black rock have already filed an updated/amended S-1 for their #bitcoin ETF. pic.twitter.com/sVAL9qVmiy
— James Seyffart (@JSeyff) December 22, 2023
These projections led to a rise in positive sentiment in the BTC market, keeping the coin’s price at an 18-month high in December.
According to data from Coin geckoOver the 31 days, BTC’s value rose by double digits to close the trading year above $42,000.
Perhaps spot ETFs don’t offer as much protection against risk
With a BTC Spot ETF, investors have the opportunity to gain exposure to the currency’s price movements without having to own the coin itself.
It works through an ETF issuer and creates shares that represent ownership of the underlying BTC. These shares are then made available for purchase on designated exchanges.
Interested investors can buy and sell ETF shares at prices designed to closely track the current market price of BTC.
BTC spot ETFs are widely touted as opportunities for investors to hedge against the risks associated with directly holding the coin.
But this time, the currency’s reaction to the series of news surrounding the possible approval of the investment vehicle has put this in doubt.
There has been a consistent trend of cases where speculation over the SEC’s approval of a BTC ETF has impacted its price.
This has underscored the regulator’s concerns about the nature of the BTC market’s volatility and how “legitimizing” crypto by granting such approval would cause more damage.
The race to launch the first spot-traded BTC ETF began in July 2013 when Cameron and Tyler Winklevoss filed to launch the Winklevoss Bitcoin Trust. The SEC issued a decision four years later, in March 2017, rejecting the filing.
The New York Times reported:
“Within minutes of SEC’s announcement, the price of a single Bitcoin fell by more than 15 percent, to approximately $1,060.”
In March 2021, Cboe BZX Exchange Inc. archived a proposed rule change to list and trade shares of the VanEck Bitcoin Trust under the BZX rule.
After a series of delays, the SEC rejected the rule change request, claiming that the applicant had failed to demonstrate that its “Bitcoin-based commodity trusts and Bitcoin-based trust issued receipts” were designed in such a way that “fraudulent trading ” was prevented. and manipulative acts and practices.”
If reported by Bloomberg,
“Bitcoin extended losses after the rejection but recouped some of them in mid-afternoon trading.”
The SEC had already done so in March 2023 turned down all three propose to list and trade shares of the VanEck Bitcoin Trust.
Another notable event was how the price of BTC rose following a decision by the three-judge panel of the DC Circuit Court of Appeals in the Grayscale Investments case against the Securities and Exchange Commission. [SEC].
In October 2021, Grayscale Investments asked SEC approval to convert Grayscale Bitcoin Trust (GBTC) into a BTC spot ETF. The controller turned down the request, citing non-compliance with anti-fraud requirements and investor protection standards.
Grayscale then appealedarguing that the SEC’s denial was arbitrary and highlighting its endorsement of “materially similar” Bitcoin futures ETFs.
In December 2022, the SEC defended its decision, stating that the approved ETFs were based on futures contracts traded on the Chicago Mercantile Exchange (CME), as opposed to Grayscale’s spot ETF filing.
Grayscale responded, claiming that SEC’s treatment was unfair and discriminatory.
In a decision The Court of Appeals, handed down on August 29, 2023, sided with Grayscale and urged the SEC to review its decision.
Following the court ruling, BTC’s value rose 6% within 24 hours, showing that sentiment improved and trading activity soared.
This series of BTC price movements since 2017 suggests that a spot BTC ETF is not without risk, especially when it comes to the volatility of the coin’s price.
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The shares and the underlying asset remain closely linked, so that when investors purchase shares of a spot ETF, they essentially gain exposure to the actual price movements of BTC.
If the price of BTC fluctuates, this can also lead to fluctuations in the value of the ETF shares.
