JPMorgan Anticipates SEC Approval of Spot Bitcoin ETFs After Grayscale’s Victory
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The US Securities and Exchange Commission (SEC) will likely be forced to approve multiple spot Bitcoin (BTC) exchange-traded fund (ETF) applications following the recent Grayscale victory.
In a Friday note, JPMorgan analysts led by Nikolaos Panigirtzoglou wrote that Grayscale’s win implies that the SEC would have to retroactively withdraw its previous approval of futures-based Bitcoin ETFs in order to defend its denial of Grayscale’s proposal of converting its Bitcoin trust into an ETF.
However, such a move would be “very disruptive and embarrassing for the SEC” and appears unlikely, the analysts said, adding:
“It looks more likely that the SEC would be forced to approve the spot bitcoin ETF applications that are still pending from several asset managers, including that from Grayscale.”
Last week, the US Court of Appeals for the District of Columbia Circuit ruled in favor of Grayscale, ordering the SEC to set aside its earlier rejection of Grayscale’s application and reopen the review process.
The court ruled that there was no justification for the SEC to allow Bitcoin futures-based ETFs but deny spot Bitcoin ETFs.
It claimed that fraud and manipulation in the Bitcoin spot market pose a similar risk to both futures and spot products because the spot market and the CME futures market are tightly correlated.
Therefore, the SEC’s rejection of Grayscale’s proposal was “arbitrary and capricious” because the agency failed to explain its different treatment of similar products, the court ruled.
SEC Could Approve Multiple Spot Bitcoin ETFs At Once
The SEC said last week that it would delay decisions on spot Bitcoin ETFs proposed by several firms, including BlackRock, Fidelity, and Invesco, until at least mid-October.
However, JPMorgan analysts argued that the postponement “likely points to approval of multiple spot bitcoin ETF applications at once rather than granting a first-mover advantage to any single applicant.”
“That could be beneficial for investors as it would allow for more competition in terms of ETF fees. Grayscale will likely face even bigger pressure to lower fees if its trust gets approval to be converted to the largest bitcoin spot ETF in the world.”
The SEC has consistently cited inadequate cross-exchange market surveillance, as well as concerns of fraud and market manipulation, as reasons why it has not yet approved a Bitcoin spot ETF.
Meanwhile, wealth management firm Bernstein has also said that the recent Grayscale victory over the SEC will pave the way for a spot Bitcoin ETF approval.
In a recent research report, the broker noted that the win marks the second huge victory for the industry following Ripple’s partial win last month.
Likewise, Bloomberg analysts Eric Balchunas and James Seyffart have said that the win may trigger a catalytic effect, expediting the launch of Bitcoin ETFs by 95%.
“Spot bitcoin ETFs have a 75% chance of launching by the end of this year and 95% by the end of 2024,” the duo wrote in a post on X.
NEW: @JSeyff & I are upping our odds to 75% of spot bitcoin ETFs launching this yr (95% by end of '24). While we factored Grayscale win into our prev 65% odds, the unanimity & decisiveness of ruling was beyond expectations and leaves SEC w "very little wiggle room" via @NYCStein pic.twitter.com/IyEGmWjuHa
— Eric Balchunas (@EricBalchunas) August 30, 2023
