JPMorgan believes Grayscale’s recent legal victory against the SEC increases the chances of spot Bitcoin ETF approval.

JPMorgan believes Grayscale's recent legal victory against the SEC increases the chances of spot Bitcoin ETF approval.

Is the Approval of a Spot Bitcoin ETF on the Horizon?

In a recent report, JPMorgan suggested that the Securities and Exchange Commission (SEC) may be compelled to approve spot bitcoin exchange-traded fund (ETF) applications from multiple asset managers. This prediction comes on the heels of a federal court ruling that mandates the SEC to review its rejection of Grayscale’s proposal to convert the Grayscale Bitcoin Trust (GBTC) into an ETF.

According to analysts at JPMorgan, the court ruling highlighted the arbitrary and capricious nature of the SEC’s denial of Grayscale’s attempt. Specifically, the regulator failed to provide a clear explanation for its differential treatment of similar products, such as futures-based bitcoin ETFs. The court reasoned that fraud and manipulation risks exist in both spot and futures markets, as the spot bitcoin market and the CME bitcoin futures market are tightly correlated.

This ruling carries significant implications, as it questions the SEC’s previous approval of futures-based bitcoin ETFs while denying spot ETFs. To defend its denial of Grayscale’s proposal, the SEC would need to retroactively withdraw its previous approval, a move that would be disruptive and embarrassing for the regulatory body. Consequently, JPMorgan believes that such a withdrawal is unlikely.

Despite the potential approval of a spot bitcoin ETF, JPMorgan notes that it may not have a transformative effect on the crypto market. While spot bitcoin ETFs have been available outside the U.S. for some time, they have struggled to generate substantial investor interest. Additionally, both futures-based and physically backed bitcoin funds have seen limited investor engagement since the second quarter of 2021.

• The Secret Victory: How Bitcoin Changed Energy Consumption Narrative
• GALA’s 2023 plunge of 72% attributed to internal conflicts and legal disputes.
• Oprah and The Rock accept Bitcoin donations for Maui fire victims

Spot-based ETFs offer a unique advantage to investors by allowing them to hold positions indefinitely without incurring the rollover costs associated with futures ETFs. Consequently, the launch of spot-based ETFs has been eagerly anticipated by the crypto market. It is believed that the approval of such ETFs would open the floodgates to mainstream adoption and attract a significant influx of traditional investors.

In conclusion, the recent court ruling mandating the SEC to review its rejection of Grayscale’s proposal has brought the approval of spot bitcoin ETFs closer to reality. If the SEC were to deny these applications, it would require them to retroactively withdraw their previous approval of futures-based bitcoin ETFs, a move that is seen as unlikely due to its disruptive nature. However, it remains to be seen whether the eventual approval of spot-based ETFs will have a substantial impact on the crypto market, as previous bitcoin funds have not attracted significant investor interest in recent months. The debut of spot-based ETFs is eagerly awaited in the hopes that it will unlock the mainstream flow of capital into the crypto industry.

We will continue to update Phone&Auto; if you have any questions or suggestions, please contact us!