With the approval of the Futures bitcoin ETF, firms have taken it a step further and applied with the Securities and Exchange Commission (SEC) for a spot-based bitcoin ETF. However, unlike their futures and short counterparts, spot ETFs have not found favor in the eyes of regulatory oversight. And as more spot-based bitcoin ETF applications are rejected by the SEC, questions have been raised about whether the market will see it anytime soon.
Grayscale and bitwise applications rejected
Over the past month, anticipation has built up regarding spot-based bitcoin ETF filings by both Grayscale and Bitwise. After Grayscale filed its application last year, the SEC postponed its decision several times, but the firm remained steadfast in its determination to gain approval for the Spot Bitcoin ETF. The final verdict came last week and it was actually negative as predicted by the experts.
Grayscale had received rejection on its application but it was not the only one. Bitwise also made a filing for the Spot BTC ETF, and the SEC also stamped it with disapproval. The latter applied to convert its popular Grayscale Bitcoin Trust (GBTC) into a spot-based ETF. The fund, which has $12.35 billion, is the largest bitcoin trust and is looking to go to the next level.
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Upon the rejection, Grayscale swiftly filed suit against the SEC alleging that the regulatory body had virtually no reason to deny its application. Grayscale CEO Michael Sonnenshein lamented the fact that the SEC had approved four futures bitcoin ETFs in less than a year, but refused to approve any spot-based BTC ETFs, He was accused of “acting arbitrary and capricious”.
Grayscale discount grows | Source: Arcane Research
However, the SEC has said that the rejection was due to fears about market manipulation in the bitcoin spot market, the role stablecoin Tether would play in it, and a total lack of regulated exchanges and oversight in the bitcoin market.
Bitwise on the other hand has not taken any action after the rejection and seems to be taking it on the chin.
Is a Spot-Based Bitcoin ETF Coming?
With the rejection, the reality of spot-based bitcoin ETFs hitting the market has been pushed back once again. Given the time frame it takes for the SEC to make a decision on these ETFs, it is expected that it could take about two years, or about 18 months, to decide and receive a decision on another spot-based ETF. This means that the market is unlikely to see spot-based BTC ETFs this year, contrary to what market analysts are forecasting in 2021.
BTC holding shakily above $20,000 | Source: BTCUSD on TradingView.com
Still, Grayscale hasn’t shied away from its mission to convert GBTC to a spot-based ETF. The trial is still in its early stages, but the CEO has expressed hope that he will get a verdict next year.
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Grayscale’s GBTC is still trading at a steep discount and the firm’s annual management fee is firmly at 2%. This means that if its filing to convert to a spot-based ETF is not approved within the next two decades and fails to remain close-ended, it will be unable to justify the exemption at which it is currently trading. doing business in. However, with the firm’s campaign to gain approval from the SEC, it’s not a stretch to think it will get it in the next 20 years.
Featured image from Coincu News, charts from Arcane Research and TradingView.com
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