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SEC’s Surrender: Bitcoin ETF on the Horizon, Experts Predict

Ruholamin Haqshanas
Last updated: | 2 min read
Source: iStock/Photographer, Filmmaker, Designer

The Securities and Exchange Commission (SEC) has seemingly conceded its battle against a Bitcoin (BTC) exchange-traded fund (ETF) as the deadline for an appeal passed on Friday. 

With the agency’s inability to appeal a key court ruling, many now predict that a Bitcoin ETF will soon make its way to the market, potentially as early as January 10, according to analysts at Bloomberg.

The SEC’s decision not to challenge the August court ruling in the case of Grayscale vs. SEC is unlikely to be a result of a change of heart by Chair Gary Gensler

Rather, it is believed that the agency’s limited legal resources, coupled with the court’s dismantling of the SEC’s justification for denying the ETF, led to their decision to fold their cards.

Back in May, a US court ruled in favor of Ripple in the ongoing lawsuit brought by the SEC, claiming that selling XRP on exchanges in itself does not constitute an investment contract. 

The ruling, issued by the District Court for the Southern District of New York, stated that the “offer and sale of XRP on digital asset exchanges did not amount to offers and sales of investment contracts.”

However, the federal judge also ruled that XRP is a security when sold to institutional investors, as it met the conditions set in the Howey Test.

It Remains Unclear Which Company Will Be Greenlighted ETF First

Meanwhile, the specific company that will offer the ETF and the implications for the crypto markets, which have experienced a prolonged slump, remain uncertain.

Grayscale has been at the forefront of the legal battle to secure SEC approval for a Bitcoin ETF, a type of fund that has been available in Europe and Canada for years. 

As the court proceedings started to favor Grayscale, major players in the financial industry, including BlackRock and Fidelity, also filed applications to offer their own ETFs. 

Given the optics, it would not be surprising if the SEC grants approval to a well-known traditional finance company like BlackRock first.

The more intriguing question revolves around the impact of a long-awaited ETF on the crypto markets. 

For years, the industry has anticipated that institutional money flowing into cryptocurrencies would be a game-changer, injecting billions of dollars of new capital and driving up prices. 

With the ETF on the horizon, it is easy to envision large asset managers encouraging clients to allocate a portion of their portfolios to Bitcoin.

However, there is a concern within the industry that this influx of institutional money may not materialize as anticipated. 

While crypto prices have maintained respectable levels, trading volumes have dropped significantly, creating the impression that the industry has lost its appeal. 

A significant price rally driven by the ETF’s introduction would undoubtedly change the narrative and generate much-needed enthusiasm. 

But if such a rally fails to materialize, the pressure on the crypto industry will intensify to demonstrate that current conditions are on the cusp of transformation.