It seems that Grayscale’s spot Bitcoin ETF has been in regulatory limbo longer than a Siberian Winter due to the Securities and Exchange Commission’s (SEC) hesitance to green-light it and that’s translating to frenetic moves in crypto once again.
In a recent decision, the SEC was ordered by a U.S. appeals court to review Grayscale’s application for a spot Bitcoin ETF. Although the SEC could still reject the application, it needs a new justification to do so.
Similarly, other companies like Coinbase are stuck in a regulatory to and fro with the SEC. Coinbase is even contending with a lawsuit that alleges it’s selling securities, which could have ripple effects on the ETF applications that list Coinbase as a custodian.
So, what does it all mean for Bitcoin and other cryptocurrencies?
- A U.S. court ordered the SEC to reevaluate Grayscale’s Bitcoin ETF application, requiring new justification for any potential rejection.
- Following the court decision, Bitcoin’s price shot up 16%, and other crypto-related stocks also saw significant gains, raising questions about market stability.
- A Bitcoin ETF approval could offer a more regulated investment option, but market volatility remains a constant concern.
The market has reacted to these developments with the same kind of euphoria generally reserved for pharma blockbuster news. Bitcoin’s price shot up 16% within 24 hours following the appeals court decision, hitting $35,000. Ethereum followed suit, climbing above $1,750. Crypto stocks like Coinbase (COIN) and Bitcoin miners MARA and RIOT also experienced significant surges.
This begs the question, is all this speculation building a house of cards or laying the foundation for a more robust crypto market?
It’s imperative to be aware that regulatory approval for ETFs could ignite an enormous rally. In that same vein, keep an eye on companies like Coinbase. If the SEC’s lawsuit against the crypto exchange innovator gets dismissed, it could pave the way for a multitude of ETF approvals. Indeed, Coinbase’s expected earnings growth rate for the current year is approaching 86%.
What Does It Mean For Traders?
The approval of a spot Bitcoin ETF could offer a more regulated investment avenue, providing some degree of protection for retail investors, so keeping an eagle eye on these regulatory developments is not just optional but imperative.
With that said volatility is unlikely to dissipate anytime soon. While approval for Bitcoin ETFs and clarity from the SEC could be game-changers, sharp drawdowns and fast spikes are intrinsically part of the crypto world.
What’s worth noting is that significant financial institutions have applied for Bitcoin ETFs, signaling their confidence in eventual approvals. However, as we’ve seen, even a rumor about a Blackrock Bitcoin ETF approval can turn the market frenetic so expect more of the turbulence near-term.
The jury’s still out on whether the SEC will finally approve Bitcoin but for investors and the ongoing saga presents both pitfalls and opportunities. From the most seasoned hedge funds to the solo retail traders, the regulatory deliberations can spell boom or bust.
What we do know is that as the SEC’s regulatory stances continue to unravel, so too will opportunities in the crypto market. Expect the next big move in crypto to be catalyzed by something as innocuous as a regulatory nod or a courtroom dismissal.