Bitcoin Bulls Get Ready
Posted June 10, 2022
Though most people have forgotten about it, a Bitcoin ETF is still in the cards — and it could be a big boon for Bitcoin. Today, James gives us an update on the latest Bitcoin ETF news, and why it could happen sooner than many people think. Moreover, he’ll explain why this amounts to an “increased unification between DeFi and traditional financial markets” and what it will mean for the price of Bitcoin. Read on.
Bitcoin Bulls Get Ready
Bitcoin’s moment of reckoning could soon be upon us.
Financial services firms have been fighting for years to convince the US Securities and Exchange Commission (SEC) to approve a Bitcoin spot exchange traded fund (ETF).
An ETF would allow investors to buy bitcoin as easily as buying a share of stock. For retail investors, it would mean the ability to buy Bitcoin from any kind of brokerage account - including many retirement accounts.
For institutional investors, it would allow them to more easily buy Bitcoin without having to open up a new account with an exchange like Coinbase.
Regulators are most concerned that a Bitcoin ETF would help normalize the cryptocurrency, and perhaps create risks for the traditional financial system.
So far, they’ve managed to prevent an ETF that invests directly in digital assets. That soon could change.
Last year, the SEC approved a Bitcoin futures ETF - essentially a fund that allowed investors to speculate on the future price of Bitcoin.
Rather than owning Bitcoin directly, the futures ETF makes a sort of wager against another investor on the future price of Bitcoin.
For Bitcoin’s advocates and investors, the existing ETF does not go far enough.
By limiting the funds investment in futures, the current Bitcoin ETFs are limited to investments in the much smaller futures market.
However, all of this might be coming to a head.
Next month, the SEC will have to decide on the fate of a new Bitcoin ETF - Grayscale Bitcoin ETF.
Grayscale currently operates a Bitcoin investment fund and has been working for years to bring a Bitcoin ETF to market.
So far, the SEC has denied each of Grayscale’s applications.
Now the company could be preparing to go to court.
In recent months, Grayscale has been hiring big name lawyers (including one with supreme court experience) as they demonstrate to regulators that they are prepared to engage in an expensive court battle to win approval for their ETF.
Although I expect that regulators will deny (or delay) a decision on Grayscale next month, I think it's only a matter of time before Grayscale decides that enough is enough.
Grayscale stands to make more than $157m annually in fees if their fund is approved, meaning that the economic decision to go to court is an easy one.
For the SEC, the legal strategy is risky because a ruling against the commission could reduce their power to regulate other cryptocurrency ETFs in the future.
Still, I expect the SEC will call Grayscale’s bluff, resulting in a long - drawn out - court battle that will ultimately result in a Bitcoin ETF approval.
The approval of Grayscale would mean increased unification between DeFi and traditional financial markets and a whole new universe of investors who would have access to Bitcoin.
For cryptocurrency investors, Grayscale’s approval would likely put new bullish momentum into the price of Bitcoin and other cryptocurrencies.
We’ll just have to wait to see how it plays out but I have my suspicions that the ETF will get approved…eventually.
Editor, Altucher’s Investment Network