Is the Bitcoin Spot ETF Approval Imminent? A Summary of the Latest Developments

Author: Meteor, ChainCatcher
On the 15th anniversary of Bitcoin's inception, it experienced a sharp decline, dropping from $45,000 to below $41,000, with an intraday drop of about 10%. Some believe it is a market correction or influenced by the U.S. stock market, while most think the plunge was triggered by a report from Matrixport. Matrixport released a report yesterday stating that it expects the SEC to reject all Bitcoin spot ETF proposals in January, which could lead to large-scale liquidation activities in the market, potentially causing Bitcoin's price to drop rapidly by 20%.
Just a day before the report was published, Matrixport analyst Markus had stated that Bitcoin would rise to $50,000 in January 2024. Many believe Matrixport's "volatility" is an attempt to manipulate market prices. After the significant drop in Bitcoin, Matrixport co-founder Wu Jihan also stated that Matrixport's analysts were not expressing two completely opposite views on the same day; rather, they were making their analyses based on market changes, which did not influence the market's plunge.
In fact, the market's decline was not significantly related to Matrixport; Matrixport merely made its own predictions. After the drop, Bitcoin quickly rebounded and briefly broke through $44,000.
However, there have been many recent reports regarding the approval of Bitcoin spot ETFs. Fox Business reported yesterday on an article stating that sources indicated staff from the SEC's Trading and Markets Division would meet with officials from major exchanges (NYSE, Nasdaq, and Cboe) to discuss the matter. Although a final decision has not yet been made, the meeting is seen as a positive signal, and the SEC may start notifying ETF issuers of approvals as early as this Friday (today), with trading potentially beginning next week.
ETF analysts and issuers agree that the SEC will likely make a favorable decision by January 10, which is the deadline for the SEC to decide whether to approve the Bitcoin spot ETF applications submitted by ARK Investment Management LLC and 21Shares.

Approval of Bitcoin Spot ETF

Recently, there has been a lot of content regarding ETF approvals. Bloomberg ETF analyst Seyffart James stated in an interview that Bitcoin ETFs are likely to be approved around January 10. James had previously predicted that Grayscale would win its lawsuit against the SEC. Below is a summary of his views on Bitcoin ETFs:
The recent frequent meetings and discussions between the SEC and ETF issuers indicate that both sides are taking a more collaborative and open approach to address issues and concerns related to ETFs. The SEC is working to adjust and finalize these documents to facilitate their approval. James believes that while not all Bitcoin ETFs may be approved, it is highly likely that most will receive approval.
Grayscale's victory in its court case against the SEC significantly changed the landscape. The SEC did not choose to appeal, and the SEC's approvals for ETFs from firms like Fidelity, BlackRock, and VanECK have only been delayed, not rejected, further reinforcing the belief that Bitcoin ETFs will be approved soon.
During the ETF review process, the SEC will have a public comment period, where feedback from professionals to ordinary users will influence the SEC to some extent. The SEC may expedite the approval of ETFs to avoid a prolonged comment period. The theoretical final approval deadline for Ark and 21Shares' ETFs is January 10, but it is also reasonable for approvals to occur before January 8.
It is challenging for the SEC to approve only a specific Bitcoin spot ETF, similar to the launch of Bitcoin futures. Approving just one could skew market share, and later-launching ETFs might lower some purchase standards, leading to capital outflow from the market. The SEC needs to promote and maintain market fairness.
Over the years, the Bitcoin market has significantly developed and matured, with better infrastructure, more institutional participation, and a stronger regulatory framework. ETF issuers are continuously updating their S-1 filings, gradually addressing the SEC's concerns and agreeing to many of the SEC's approval requirements.
Mature financial institutions are increasingly interested in Bitcoin spot ETFs, playing a role in promoting regulatory transparency and ETF approvals.

What Crypto Can Bring After Approval

The approval of Bitcoin ETFs could lead to billions or even more dollars flowing into the cryptocurrency market. Additionally, trading platforms like Coinbase, acting as custodians and providers, would enhance market stability and investor confidence, driving up the prices of cryptocurrencies like BTC. Furthermore, this could provide broader access to cryptocurrencies for investors. For many who wish to enter the crypto space, some may be reluctant to spend time or effort understanding the fundamentals of blockchain and compliance with SEC rules regarding cryptocurrency custody, but still want to nominally own Bitcoin. Purchasing a spot ETF is a great way to achieve this, and ETF approvals will further democratize investment in traditional markets.
With institutions entering the Bitcoin spot ETF space, the demand for crypto assets backed by real-world assets may grow among both institutions and retail investors, thereby promoting the development of the RWA tokenization sector. For example, the tokenization of real estate and other assets may become a leading trend in Crypto in 2024, making real estate investment easier and providing partial ownership or faster settlement processes. In the future, tokenization may also replace some investment trusts.