Author: Ben Strack, Blockworks
Translation: Felix, BlockingNews
BlackRock’s plan to launch a bitcoin spot ETF caused a stir in the market last week, and a day later, Bitwise, an asset management company focused on cryptocurrencies, resubmitted a new application to modify the rules to accommodate its planned bitcoin spot ETF.
Despite efforts from the Winklevoss twins, Fidelity, and many other potential applicants, the SEC has never allowed a bitcoin spot ETF to enter the US market. BlackRock and Bitwise, who have recently filed applications for a bitcoin spot ETF, have slightly different products.
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According to reports, Bitwise applied for a bitcoin spot ETF in October 2021, but the proposal was eventually rejected by the SEC in June 2022. Bryan Armour, Morningstar’s director of passive strategy research, said that the filing submitted by the New York Stock Exchange Arca (the potential listing exchange for Bitwise products) on June 16 added more legal analysis about monitoring bitcoin through the Chicago Mercantile Exchange (CME) futures market.
“If the SEC is really going to approve the first bitcoin spot ETF, then Bitwise’s application may come after BlackRock’s,” said Bryan Armour.
In April of this year, Matt Hougan, Bitwise’s chief investment officer, said that while a bitcoin spot ETF is “great for investors in the long run,” Bitwise may wait for clearer regulation before launching another ETF. A Bitwise spokesperson confirmed the company’s reapplication on Tuesday but declined to comment.
Sumit Roy, senior analyst at ETF.com, said Bitwise’s move “is clearly a direct response to BlackRock’s application for a bitcoin spot ETF.”
Some believe that BlackRock’s bitcoin spot ETF is more likely to be approved because it will introduce surveillance-sharing agreements between Nasdaq (NDAQ) and bitcoin spot trading platform operators to mitigate market manipulation. The surveillance-sharing agreement allows for the sharing of information about market trading activity, clearing activity, and customer identity, virtually eliminating the possibility of market manipulation.
In addition, according to filings submitted by Nasdaq (the potential listing exchange for BlackRock products) and NYSE (the potential listing exchange for Bitwise products), both mention the SEC’s approval of Teucrium’s bitcoin futures fund. In the approval document, the CME is described as “constantly and comprehensively monitoring the state of the futures market and price trends to detect and prevent price distortions, including those caused by manipulative conduct.”
As far as BlackRock is concerned, Nasdaq is willing to sign a supervisory sharing agreement with “a US Bitcoin spot trading platform operator.” This will supplement the supervision sharing agreement between Teucrium and the Chicago Mercantile Exchange.
However, there are doubts as to whether this is enough to enable BlackRock’s spot Bitcoin ETF to pass.
Sumit Roy, senior analyst at ETF.com, said that in BlackRock’s application, the trustee is the cryptocurrency trading platform Coinbase, which is being sued by the SEC for operating as an unregistered exchange. But since BlackRock lists Coinbase as the trustee, BlackRock is expected to have access to insider information and resolve the Coinbase lawsuit. In addition, with the Grayscale lawsuit against the SEC soon to be decided, things will become quite complicated.
After BlackRock and Bitwise submitted their applications, GBTC rose 30% in the past five trading days and rose about 14% that day.
Industry observers say they expect more institutions to rejoin the competition for spot Bitcoin ETFs. Although the market has been focused on Fidelity (another traditional institutional giant that previously sought to launch spot Bitcoin ETFs), the fund giant has not reapplied for such funds. A Fidelity spokesperson declined to comment on this.
However, it is not these two that are reapplying.
In April of this year, Ark Invest and 21Shares re-applied for their spot Bitcoin ETFs. On June 21st, asset management companies Wisdomtree and Invesco resubmitted their spot Bitcoin ETF applications one after another. Bloomberg analysts said last week that other institutions that have previously applied for spot Bitcoin ETFs, such as VanEck, Valkyrie, and Global X, may also reapply.
Bryan Armour said that as applicants adopt new approaches or see the possibility of SEC approval, and it is crucial to become one of the first ETFs on the market, a large number of applications often appear.
Related Reading: Can BlackRock’s spot Bitcoin ETF pass?