SEC Faces Midnight Deadline: Will a Spot Bitcoin ETF Finally Emerge?

Crypto community are on the edge of their seats as the U.S. Securities and Exchange Commission (SEC) faces a midnight deadline to challenge its court loss against Grayscale Investments. The decision expected from this legal showdown could have substantial consequences for the cryptocurrency market, particularly Bitcoin.

Grayscale Investments has long sought to convert its Grayscale Bitcoin Trust into an exchange-traded fund (ETF). The trust currently manages approximately $17 billion in assets but trades like a closed-end fund, with a significant price deviation from the underlying Bitcoin assets.

This situation has led numerous hedge funds and investors to bet that the discount will eventually close if the trust is allowed to convert into an ETF, following the usual share redemption and creation process that keeps prices aligned.

The ramifications of this SEC decision go beyond Grayscale’s Bitcoin ETF application. Several financial giants, including BlackRock, Fidelity, VanEck, Invesco, and others, have applied to launch their spot Bitcoin ETFs. If the SEC greenlights these funds, it could lead to billions of dollars flowing into Bitcoin as institutional investors gain a more familiar way to invest in the cryptocurrency.

K33 Research, known for its insights into the crypto market, predicts that spot Bitcoin ETFs could attract over 30,000 BTC, equivalent to nearly $1 billion, within their first ten trading days. This capital influx could potentially drive Bitcoin’s price beyond $42,000 within 100 days after approval, according to Vetle Lunde, an analyst at K33 Research.

The momentum behind the approval of spot Bitcoin ETFs has gained traction following a landmark court decision. In August, a panel of judges in the U.S. Court of Appeals for the D.C. Circuit ruled that the SEC had acted arbitrarily and capriciously in rejecting Grayscale’s ETF conversion bid.

After this judgement, Bloomberg ETF analysts Eric Balchunas and James Seyffart raised the odds of a spot Bitcoin ETF approval by the SEC to 75% by the end of this year and a remarkable 95% by the end of 2024. They cite the unanimous rejection of the SEC’s arguments by the appellate court judges and growing pressure on the agency.

The SEC had previously expressed concerns about the surveillance of Bitcoin trading platforms, alleging a lack of safeguards against fraud and manipulation. Grayscale countered this by highlighting the absence of a valid reason to distinguish between spot Bitcoin ETFs and those based on Bitcoin futures, which the SEC had previously approved.

The court’s decision initiated a 45-day period during which the SEC could request an “en banc” hearing involving all appellate court judges. This deadline expires at midnight today. The SEC could also seek an appeal at the Supreme Court even if it chooses not to request an en banc hearing. The court’s decision would vacate the SEC’s previous rejection and send the ETF application back to the agency.

Many in the crypto industry believe the SEC may not appeal, potentially paving the way for the approval of spot Bitcoin ETFs.

Crypto YouTuber, Crypto Rover wrote on X: “All #Bitcoin Spot ETFs might be approved this Friday, and here’s why: This Friday marks the deadline for the SEC to appeal the Grayscale Bitcoin Spot ETF decision. If they don’t appeal the court’s decision, they will have no further options to decline any other Spot Bitcoin ETFs, and thus, they will be forced to approve them all. So if the SEC doesn’t appeal by the end of Friday, we are essentially guaranteed to see all the Spot ETFs approved.”

Crypto enthusiasts and industry insiders are closely monitoring the situation, and the outcome could potentially spark a new bull run for Bitcoin and other digital assets.

Shivam Thakral, CEO of BuyUcoin, said in an email statement shared with AlexaBlockchain: “A big day for crypto enthusiasts as the SEC deadline to appeal against Bitcoin ETF ends today. If the SEC chooses not to appeal, it may pave the way for speedy Bitcoin ETF approval in the future and could spark the next bull run for BTC and other digital assets.”

Former SEC Chairman Jay Clayton emphasized in a recent CNBC interview that Bitcoin’s status as a non-security is clear, and approval for Bitcoin ETFs is inevitable. He noted the growing demand from both retail and institutional investors for trusted fiduciaries to provide Bitcoin exposure to the public.

Looking at the SEC’s historical opposition to spot Bitcoin ETFs, the possibility of further delays cannot be ruled out, but it appears that the long-awaited conclusion to this saga may finally be within sight.

Read Also: Former SEC Chairman Clayton Says Spot Bitcoin ETF Approval Becoming ‘Hard to Resist’