Author: Loopy Lu
On August 30th, Grayscale won the lawsuit against the SEC. The market surged, and Bitcoin briefly broke through $28,000. With Grayscale’s legal victory, people have high hopes for the “approval of a Bitcoin ETF in the United States,” and this “ambition” in the crypto world seems within reach. However, within less than 48 hours after Grayscale’s victory, unexpected changes occurred.
Today, the U.S. Securities and Exchange Commission (SEC) announced that they need to postpone the approval time for Bitcoin spot ETFs, including at least three proposed ETFs by WisdomTree, Valkyrie, and Invesco. The decision on these products will be postponed until mid-October.
Tomorrow and tomorrow and tomorrow
This is not the first time the SEC has delayed approval of Bitcoin ETFs recently.
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In mid-June, BlackRock submitted an application for a Bitcoin spot ETF, which sparked obvious bullish sentiment in the cryptocurrency market. In late July, the SEC began reviewing whether to approve or reject six Bitcoin spot ETF listing applications, including BlackRock’s iShares Bitcoin Trust, Fidelity’s Wise Origin Bitcoin Trust, WisdomTree Bitcoin Trust, VanEck Bitcoin Strategy ETF, and ProShares Galaxy Bitcoin ETF.
Usually, when published in the Federal Register, the SEC will officially initiate the review. The default review period is only 45 days, but it can be extended.
Therefore, postponing the review results has become a “tried and true” strategy for the SEC.
The “ETF wave” this year can be traced back to “Wood Sister” ARK. As early as May 15th, ARK 21 Shares Bitcoin ETF was published in the Federal Register. BlackRock, with over $9 trillion in assets under management, applied for a Bitcoin ETF in June, which also caused a small wave of excitement in the industry. The SEC announced the proposal for this fund in the Federal Register on July 19th, starting the countdown of 45 days for the committee to make a decision on the product.
However, the SEC has yet to make a decision on these ETFs until now.
On August 11th, the SEC once again extended the review period for the Bitcoin ETF applications from Ark Investment Management and 21 Shares. According to the SEC’s review rules, the review can be extended for up to 240 days.
Of course, today’s postponed ETF application is similar. The SEC document stated that the ETF application from WisdomTree has been postponed until October 17th.
The SEC seems to be trying its best to delay making a final decision and has not provided specific reasons for the delay. “The Commission believes that designating a longer period is appropriate so that it has sufficient time to consider the proposed rule change and the questions raised therein.”
Market Decline, Confusing Market Trends
With the continuous delay by the SEC, the market has also made pessimistic predictions about the overall market.
Coinglass data shows that in the past 24 hours, Bitcoin liquidations amounted to $48.89 million, while ETH liquidations reached $28.76 million.
During the 240-day longest review period, there are some key milestones that require decisions to be made: 45 days, 45 days, 90 days, and 60 days. If the SEC delays the decision three times, they will have to make the final decision – approval or rejection. After the 240-day period, the SEC cannot further delay the decision according to the process.
The change in market expectations has also led to the formation of a “gate” shape in the candlestick chart, with Bitcoin prices temporarily falling below $26,000. People can’t help but wonder when the ETF issue will finally be resolved.
Even before this delay, some analysts predicted the occurrence of this delay. Bloomberg analyst James Seyffart stated on August 15 that he believed the review deadline in early September might not see a conclusion. He believed that this review would inevitably be delayed, and he paid more attention to the final deadline on January 10.
Grayscale Wins Lawsuit, Whales Profit
From the market trends, Grayscale’s legal victory was a high point in this round of ETF narratives that stimulated the market.
However, as the facts gradually become clear, people are starting to doubt whether Grayscale’s victory is really a victory for BTC. Although Grayscale won the judicial victory against the SEC, it does not mean that Grayscale’s GBTC will be approved for conversion into a spot ETF.
Bloomberg TV analyst Sonali Basak said, “This does not mean that GBTC will automatically convert into an ETF. As the court has said, this only means that the U.S. SEC has failed to explain why it approved Bitcoin futures ETPs but not the product proposed by Grayscale (spot ETF).” She added that there is still a long process ahead, including a 45-day appeal period, during which both parties will review the ruling, and the SEC can also request a full hearing. “It is currently unclear whether Grayscale needs to resubmit the application to convert GBTC into an ETF.”
In short, the court only believes that the SEC’s rejection of Grayscale’s process was not in compliance with the rules, nothing more. After going through the review process again, the SEC can still reject Grayscale’s application using other reasons. However, such an ambiguous news has brought strong stimulation to the market.
When we look back before Grayscale’s legal victory, it is not difficult to find that whales were continuously positioning themselves and making substantial profits.
Santiment monitoring data shows that wallets holding 10-10000 BTC increased their holdings by nearly $400 million the day before the news of Grayscale’s victory was announced. Although lacking evidence, people still suspect that whale addresses may have known the outcome of the Grayscale-SEC lawsuit based on trading operations.
Grayscale’s victory seems to have created an opportunity for whales to exit. Before Grayscale’s victory, nearly 30,000 BTC were transferred to CEX, with a market value of $822 million.
On August 29th, Markus Thielen, the research director of Matrixport, a cryptocurrency financial company owned by Wu Jihan, said, “We will go long on Bitcoin and strictly stop loss. We expect US Treasury yields to decline and US technology stocks to rise.”
“buy the rumor, sell the news”
Trading based on news is always risky, and it is difficult for people to make immediate trading reactions as soon as the news is disclosed.
In just 48 hours, the market has experienced a roller coaster ride and returned to its original point. Some whales may have completed their profits, while another group of retail investors experienced huge liquidations.
Eric Balchunas, a senior analyst at Bloomberg ETF, believes that he would not be surprised if the SEC delays the ETF application. He believes that the timetable for review is not important. “The SEC is still likely to make concessions at some point, and we will eventually see these applications approved.” He predicts that the probability of launching a Bitcoin spot ETF this year is 75%, and the probability of launching it by the end of 2024 is as high as 95%.
As the impact of the ETF comes to an end, the market is turning pessimistic again. Although many people believe that the approval of a Bitcoin spot ETF may bring a huge rally to the market, this event is still too far away from us.
As we enter September, the market is turning negative again. Historically, September has been the worst month for Bitcoin performance. Since 2013, there have been only two profitable September months (2015 and 2016), while the rest of the years have been losses.
Perhaps we still need to have a longer-term patience for the overall market trend. There are no potential major positive events expected in September, but in October, the potential approval of Ethereum futures ETF may be the next major event to drive the market.