SEC’s Dialogue With Wall Street Behemoth BlackRock Regarding Spot Bitcoin ETF Application Continues – Approvals Coming in January?

Joel Frank
Last updated: | 3 min read
BlackRock Spot Bitcoin ETF
BlackRock Office

Officials from the US Securities and Exchange Commission (SEC) met with three employees of BlackRock on Thursday to discuss the asset manager’s application to set up a spot Bitcoin Exchange Traded Fund (ETF), as per a memorandum released by the SEC on Friday.

News that the US regulator continues its dialogue with BlackRock should keep optimism high that spot Bitcoin ETF approvals will come sooner rather than later.

BlackRock first applied to set up a spot Bitcoin ETF, which will be called the iShares Bitcoin Trust, back in June, triggered a surge in the Bitcoin price at the time.

A dozen other asset managers quickly followed with their own applications.

BlackRock’s ETF Application a Turning Point for the BTC Market

The application from BlackRock was deemed a turning point for sentiment in the Bitcoin market this year, given the asset manager’s clout on Wall Street and amongst regulators.

Up until now, the SEC has either rejected or delayed all spot Bitcoin ETF applications citing concerns about potential manipulation of the spot market.

But BlackRock is the biggest name on Wall Street and has historically only ever applied to set up ETFs if it is certain they will gain approval.

What differentiates BlackRock’s application from those that came before it (and the applications of a dozen other asset managers that were filed shortly after BlackRock’s) is a new mechanism for monitoring trade, which theoretically should make market manipulation harder.

Expectations that spot Bitcoin ETFs, including BlackRock’s, will gain approval in 2024, spurring a wave of new institutional investment into the Bitcoin market, has been a key bullish tailwind for BTC in recent months.

At current levels near $42,000, Bitcoin is up nearly 70% from October’s lows.

Recent legal defeats sustained by the SEC versus digital asset manager Grayscale, who have been pushing to set up their own spot Bitcoin ETF for years, are deemed as speeding up the timeline for approvals.

Approval to Come in January?

As per analysts at Bloomberg Intelligence speaking in an interview on The Block’s YouTube channel, a wave of spot Bitcoin ETF applications are likely to come between the 5th and 10th of January.

That period coincides with the final deadline for the SEC to approve (or not) ARK and 21Shares applications.

In the past, such as when the SEC recently approved multiple Ether futures ETFs, the SEC has preferred to maintain market neutrality by approving a batch of ETFs at the time so as not to hand the first one to gain approval an unfair strategic advantage.

How Will BTC React?

Analysts at JP Morgan have been warning that there is a risk that, at best, spot ETF approvals are already priced into the market and, at worst, the market may even see a wave of profit-taking in wake of approvals, raising the risk of a short-term pullback.

Confusing messaging from the Fed, who on Wednesday sent a dovish signal to the market by forecasting three rate cuts next year, but on Friday sent a hawkish signal by telling the market that further rate hikes still haven’t been taken off of the table, could further raise the risk of near-term downside volatility.

But in the grand scheme of things, spot Bitcoin approvals should be a net positive by opening the door to a wave of new buying from major institutions that had, up until now, been waiting for a regulated spot product to gain approval in the US.

Next year also sees potential other bullish BTC narratives take hold, such as the BTC issuance rate halving and US elections (if pro-BTC/crypto candidates win).

Any Bitcoin dip back below $40,000 may be short-lived.