‘Likely rejection’ or smooth sailing? Experts weigh in on potential spot Bitcoin ETF

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Many are speculating on the ramifications of the United States Securities and Exchange Commission potentially deciding on exchanges listing a spot Bitcoin (BTC) exchange-traded fund (ETF) ahead of the Jan. 10 deadline.

At the time of publication, the SEC had not announced whether it planned to approve or disapprove of multiple spot BTC exchange-traded product applications in its pipeline. The commission has until Jan. 10 to decide whether to reject or approve listing shares of a Bitcoin ETF from ARK Invest and 21Shares. Analysts speculated that should the SEC approve one spot crypto investment vehicle, it could approve multiple ones.

A Jan. 3 report from 10x Research’s Markus Thielen suggested that despite bullish trends in the price of Bitcoin, ETF applicants hadn’t met the requirements necessary for SEC approval. The research paper was released amid reports that the SEC planned to hold meetings with major exchanges to finalize comments on applications submitted by spot crypto ETF issuers.

“The prevailing one-sided market consensus anticipates SEC approval of Bitcoin Spot ETFs by next week,” said Thielen. “We, however, see an opportunity to trade against consensus, emphasizing the risk involved in positioning ahead of events with significant price implications.”

He added:

“Despite frequent meetings between ETF applicants and SEC staff leading to refiled applications, we hold a contrarian view, asserting that all proposals fall short of a critical requirement for SEC approval, likely resulting in rejection in January.”

Other analysts have speculated that the SEC will likely approve the offering from ARK Invest and others in the next 10 days, based on meetings with representatives of exchanges and legal precedent. In October, the commission was forced to revisit a spot Bitcoin ETF application from Grayscale Investments after a judge ruled its decision to reject the offering was “arbitrary and capricious.”

“I expect multiple approvals on Jan. 10,” said James Murphy, founder of Ludlow Street Advisors, on X. “The SEC shot all their bullets against Grayscale. The Court would very likely find the SEC’s ‘new reason’ [for potential rejection] pretextual, reject it and I would think sanctions against the SEC lawyers could be in play.”

Related: Spot Bitcoin ETFs could be rejected if the SEC wants ‘more time’ — Analyst

The SEC has never approved a spot BTC exchange-traded product for listing and trading on a U.S. exchange despite many applications from asset managers in previous years. In June 2023, BlackRock — the world’s largest asset management company — applied for a spot Bitcoin ETF in the United States, renewing interest in the investment vehicle and leading to speculation that the commission would need to act.

Thielen, also an analyst for crypto trading platform Matrixport, authored a Jan. 2 report claiming the SEC “will reject” a spot Bitcoin ETF. After the report was disseminated across multiple social media platforms and news outlets, Matrixport founder Wu Jihan said on X that it was intended for the firm’s clients rather than the media.

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