Spot Bitcoin ETF Approval Likely in January, But Ethereum Is a ‘Completely Different Animal’: Bloomberg ETF Analyst

adminDecember 17, 2023

Bloomberg Intelligence ETF research analyst James Seyffart and his colleague Eric Balchunas have become famous on cryptocurrency Twitter this year for their spot Bitcoin ETF analysis and predictions.

In an interview with The Block’s Frank Chaparro on The Scoop podcast, Seyffart said: Potential spot Bitcoin ( BTC

-0.85%
) ETF approval was expected to occur between January 8 and January 10. He suggested there was a 90% chance of approval from October to January 10. Ahead of the financial world in April Among a field that now includes 12 other companies, BlackRock in June reached its final deadline.

So far, the Securities and Exchange Commission has delayed making a decision, but it has until a Jan. 10 deadline to approve or reject the Ark and 21Shares ETFs. Seyffart argues that the SEC is strategically delaying its decision. Many applications, or at least most of them, must be approved simultaneously to avoid giving one company an advantage. That’s why Seyffart thinks mass approvals will come in January.

“If the SEC refuses to do this here, that would be like the SEC kind of going nuclear,” he said.

The SEC does not want to play the role of ‘kingmaker’.

“The SEC doesn’t want to pick a favorite here to win these races, whether that’s getting the most assets or the most liquidity,” Seyffart said. “So if the SEC approves all of this, it’s likely they’ll approve it all at once, because again, they don’t want to play the kingmaker role.”

Asked what gave Bloomberg analysts that sense, Seyffart said, “We’ve heard rumors from people involved in this process, people who know other people involved in this process.”

“We have some sources that are very trustworthy and some we don’t know how trustworthy they are. “But we are hearing similar stories from many different angles and from many different people, and have been hearing this for over a year,” he added.

“But yes, trying to figure something out, looking at the calendar, looking at all the dates and deadlines, trying to read the tea leaves here is really key,” he said.

The prospect of bulk approvals is unusual compared to traditional ETF filings, where companies file first and go out first if the SEC approves them, but this is a unique situation and precedence for the approval of various ether futures, Seyffart continued. The same goes for ETFs earlier this year.

“(In the case of the Ether futures ETF) there were a lot of movements from various players. Some other publishers, especially Valkyrie, have tried to jump the line and go first. But the SEC basically did everything they could to get everyone out on the same day,” Seyffart said.

“So the fact that they did their best to make sure no one got ahead of the other shows that if they actually approved as much as we did, they would likely do that here as well. “I look forward to it,” he added.

Grayscale Impact on Spot Bitcoin ETF Approval

Grayscale Investments’ win against the SEC last August on its application to convert its flagship Grayscale Bitcoin Trust (GBTC) product into a spot Bitcoin ETF is another key factor in the SEC’s potential approval. said Seyffart.

“I think the SEC is kind of backed into a corner by the judges basically throwing out the whole decision and the reasoning they used to reject ETFs in the past,” he added. “I think the SEC and Chairman Gary Gensler are overplaying their hand a little bit and know they have no choice but to back themselves into a corner right now.”

Grayscale’s case, he argued, eliminates the need for a shared surveillance agreement similar to the one Coinbase and many of its applicants currently have. However, because this situation is unprecedented, there is no guidance on required response times or approval processes. This, Seyffart noted, despite ongoing meetings between Grayscale and the SEC.

“So my guess is that if someone doesn’t go out on the first day or doesn’t get a chance to freshen up on the same day, it could be grayscale,” he added.

Ethereum Spot ETF May Take Longer Time

While there is optimism about the possibility of a spot Bitcoin ETF being approved soon, the prospect of a spot Ether ETF is “a whole different animal,” Seyffart said.

Seyffart points out that the futures market is not as robust or institutionalized as Bitcoin and highlights the differences between Bitcoin’s proof-of-work model and Bitcoin’s proof-of-work model, saying it is understandable how the SEC and Gensler would argue that the situation is different. said. Ethereum ETH

-1.64%
is a proof-of-stake model. He disagrees with these points, but adds that if the SEC tries to stop the process, it could delay decision-making or argue that Ethereum is a security.

But in Seyffart’s view, the SEC has implicitly accepted ether as a commodity. Accordingly, he believes a spot ether ETF will ultimately be approved “unlikely” by the end of May, citing deadlines for Ark and 21Shares and VanEck spot ether. May ETF application. May 23rd and 24th.

“That doesn’t mean you’ll automatically be approved.” he said “I think it’s a 100% positive sign if a Bitcoin ETF is approved. That’s a very positive sign that there’s a very good chance Ethereum spot will be approved. But we’re not at the 90% level, that’s for sure.”

Potential timeline between approval and launch

The simple answer is that the timeline between potential approval and launch of a spot Bitcoin ETF remains uncertain. Seyffart pointed out that approval follows the SEC Trading and Markets division’s 19b-4 process. However, before an ETF can launch and begin trading, its S-1 prospectus, which provides details about the issuer’s business operations and finances, must first be approved by the SEC’s Division of Corporate Finance.

Seffart added that numerous meetings have been held between the SEC and issuers to address these issues, leading him to believe that S-1 approvals can occur as soon as 19b-4 approvals are granted. Conversely, if the SEC is not prepared, it may only provide 19b-4 approval and the listing may be delayed until the S-1 is approved, which may take days or weeks. However, he emphasized that there is no certainty in predicting the exact schedule.

Seyffart emphasized that when these funds are listed, immediate investment may be delayed due to the cautious approach of major brokerages and banks, which are characterized by rigorous due diligence processes and lengthy performance requirements. “So it wouldn’t necessarily be an immediate increase for every advisor to have a few percent of their client portfolios invested there,” he said.

“People looking to buy this right away are more likely to be interested in an independent IRA or an independent advisor,” he added. Some of the money was transferring exposure from existing Grayscale trusts or the international cryptocurrency ETF ecosystem. “But if anyone can add it quickly, it’s likely BlackRock, because BlackRock has a very good relationship with all of these types of platforms.”

“I definitely think there will be a lot of hype on day one. So we’ll see exactly what it looks like. My guess is it could be hundreds of millions of dollars,” Seyffart said. “I think over the long term, there’s no doubt billions of dollars will flow into these products. There’s a reason why the world’s largest asset owners are trying to launch these products and compete.”

Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.

adminDecember 17, 2023