After a summer-time surge of exchange-traded-fund-inspired exuberance, Bitcoin advocates are back to speculating whether the SEC will ever allow asset managers to offer US funds that invest directly in the largest cryptocurrency.
(Bloomberg) — After a summer-time surge of exchange-traded-fund-inspired exuberance, Bitcoin advocates are back to speculating whether the SEC will ever allow asset managers to offer US funds that invest directly in the largest cryptocurrency.
After this week’s deferral of applications from the likes of Fidelity and Invesco by the main US securities regulator, Bitcoin has essentially erased all of the gains registered since fund powerhouse BlackRock Inc. joined in on the race in June to try to be the first to win approval. The turnaround comes even with a favorable court decision this week that appeared to clean the path for Grayscale to convert the biggest crypto trust into an ETF.
“The Bitcoin rally on ETF speculation was very aggressive,” said Michael O’Rourke, chief market strategist at JonesTrading. “The market reaction this week is telling.”
Bitcoin was trading at around $25,000 in mid June, right as BlackRock made its unexpected filing with the Securities and Exchange Commission to offer a fund. The price surged more than 20% in the weeks that followed as some observes suggested that BlackRock somehow had an advantage over other fund companies. Gains were pared in the middle of August as the wait dragged on and overall interest in crypto waned with interest rates moving higher.
Crypto advocates took solace in a court ruling Tuesday that rejected the SEC’s rationale for denying Grayscale’s proposal to convert its Bitcoin trust. The subsequent jump in price proved fleeting on Thursday, when the SEC delayed a slew of applications that were up for consideration. Bitcoin was down for a third consecutive trading session on Friday, falling about 1% to $25,700.
“That was a brief glimmer of excitement — emphasis on ‘brief,’” wrote Noelle Acheson, author of the “Crypto Is Macro Now” newsletter. The ETF-decision deferrals this week “added to background market weakness.”
A few dates in October may be key for those watching the ETF race unfold. Following this week’s deferrals, the SEC has 45 days to respond to issuers again, which means that investors will hear from the agency by mid-October.
The next round of decisions should come at roughly the same time that the SEC needs to address what it will do next in regard to the Grayscale ruling. But the start of the month should also bring a third wave of news: the launch of Ether-futures ETFs, which the SEC is poised to allow to start trading at that time.
“Over enthusiasm for the Grayscale court decision, over disappointment over the SEC postponing ETF decisions until October,” said Aaron Brown, a crypto investor who writes for Bloomberg Opinion. “There’s not much long-term fundamental news in either one. There’s also some general delevering — not just in crypto — for medium-term reasons.”
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.