Fight for Grayscale Spot Bitcoin ETFs May Raise BTC to New Records

EXANTE Lead Analyst Viktor Argonov:

In October, the US Securities and Exchange Commission(SEC) legalized bitcoin futures funds BITO from Proshares and BTF from Valkyrie. However, the market continues to wait for spot ETFs. How realistic is their appearance?

Growing market appetites

Even before the launch of BITO, the chairman of the commission GaryGensler said he still doubts the permissibility of spot bitcoin ETFs (which track the current BTC rate), but similar funds tracking the price of a cryptocurrency-based futures could be considered.

This situation was nottoo pleasant for the Grayscale company, whichholds a giant GBTC spot fund worth more than $ 40 billion in the OTC market and would like to convert it to an ETF format. Now her fund was not only not the first on the American stock exchanges, but, possibly, inaccessible on them for a long time.

Shortly after the launch of the Proshares productIt turned out that spot and futures sometimes provide significantly different returns: due to high volatility after the first days of trading, GBTC turned out to be radically more profitable than BITO. Over longer horizons, the differences may be smaller, but the study became a hint to the SEC: the public has few funds based on derivative instruments, many would prefer to invest even in the over-the-counter market, even in another country, but not in futures “surrogates”.

Fight for justice

In November, the SEC accepted the challenge and responded unequivocally,rejecting a spot ETF application from VanEck, although soon approving its futures application under the ticker XBTF. It became clear that Grayscale’s application was unlikely to be missed either. But the company turned out to be more cunning. Lawyers carefully studied the 1940 law and found that the use of futures did not justify "manipulative and fraudulent" transactions. behavior of their underlying asset.

That is, both futures and spot Bitcoin ETFsmust be treated equally. If the SEC still considers Bitcoin a manipulative and, even more so, fraudulent asset, then its futures cannot be called crystal clear either. For example, when the BTC rate collapses manipulatively, the futures price also falls.

The derivative mitigates volatility, but it was not therethe main complaint about the first cryptocurrency. Therefore, it was necessary to either legalize both ETF options, or not allow either one. With these considerations, Grayscale went to court in defense of VanEck's application.

Prospects and risks

It is possible that the court will side with the company.Obviously, the SEC will not agree to ban already issued ETFs, but it may well recognize the legitimacy of Grayscale’s analysis and even thank them for their help in a difficult issue at such a good moment. To the applause of crypto enthusiasts, the commission will allow spot ETFs – first from VanEck, and soon from Grayscale.

On this wave, Bitcoin is likely to set a new record, and what will happen next – It's hard to say. Individual whales and influencers are capable of truly unpredictably influencing its course.