Bitcoin: More good news on Grayscale ETFs

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More good news for bitcoin today: the DC Circuit Court of Appeals has finally formalised Grayscale’s victory over the SEC in the case involving its application to convert GBTC into a spot bitcoin ETF. 

With this sentence, the judge’s opinion on the matter can no longer be appealed. 

Grayscale’s Bitcoin ETF: the latest news

Grayscale is the company that created and manages the world’s largest bitcoin fund. 

This is the Grayscale Bitcoin Trust (GBTC), which to date holds more than 621,000 BTC. Excluding Satoshi Nakamoto, of whom all traces have been lost for more than 12 years, it is the largest holder of bitcoin in the world, well ahead of MicroStrategy’s 158,000 BTC. 

It has been around for many years, but it is not an ETF. It is still a secured fund that tracks the price movement of the underlying asset, but it is only listed OTC and not on traditional exchanges. 

Some time ago, Grayscale asked the SEC to approve the conversion of its GBTC into a true spot bitcoin ETF, and the SEC refused.

The lawsuit against the SEC

The company then sued the SEC and eventually won

According to the Court of Appeals, the SEC did not have sufficient grounds to deny the application, and therefore the SEC’s decision in this regard was overturned. 

Although the ruling did not explicitly order the SEC to approve Grayscale’s application, the most obvious outcome of this case would be for the SEC to admit that it did not have sufficient grounds and proceed with approval. 

Moreover, the SEC could theoretically have appealed to the same court, and if it had intended to resist to the end, it probably would have done so. 

Instead, it decided not to appeal, effectively accepting the decision. 

The final judgement

And so, yesterday, the Court of Appeals was able to issue its final and irrevocable judgment, finding Grayscale right and the SEC wrong. 

This now final ruling effectively orders the agency to reverse its rejection of Grayscale’s application, although it does not explicitly order it to approve it. 

It is now up to the SEC to decide the matter again. 

At this stage, it is expected to approve the application, although there is theoretically a small possibility that it could find other reasons to reject it again. 

In other words, this final ruling is by no means a prerequisite that makes the approval of Grayscale’s Bitcoin Spot ETF inevitable, but it does make it extremely likely that it will happen.

Grayscale News: Approval of Bitcoin ETFs

The issue is not limited to Grayscale’s GBTC, as there are several similar applications that the SEC will have to decide on. 

There is speculation that it may decide to approve them all en bloc, so as not to give any one manager a head start over the others. 

In addition, it appears that BlackRock is already making concrete preparations for the launch of its spot bitcoin ETF, suggesting that approval may be imminent. 

However, it is not certain that all of these applications will be equally likely to be approved. 

It is assumed that all those that the SEC can no longer oppose will be approved at once, starting with Grayscale’s and BlackRock’s. 

However, some of the others may be flawed or may not meet all the requirements, so some may even be rejected. 

At the moment, however, it appears that at least two applications (BlackRock and Grayscale) have all the requirements to be approved. 

The impact on the markets

The rise in the price of bitcoin over the past few days could be a trivial way of saying that the markets have already priced in the approval of spot bitcoin ETFs. 

On the other hand, BTC’s dominance has risen to its highest level in two years, with BTC setting a new annual record for 2023 and ETH not. 

At this point, it is hard to imagine that the definitive news will push bitcoin’s price any higher, although in theory there is still some room for growth in the short term. 

However, the biggest impact will be in the medium to long term, particularly over the next two to three years. 

The spot bitcoin ETFs are, in fact, directly backed by BTC, forcing their managers to buy bitcoins on the market and hold them to cover the value of all the shares issued. 

Add to this the fact that the fourth halving of bitcoin will take place in six months’ time, and the picture for 2024/2025 becomes quite interesting.