As the crypto world braces for a potentially historic week, the spotlight turns to the United States Securities and Exchange Commission (SEC), which is anticipated to approve a spot Bitcoin ETF by Wednesday, January 10. Bloomberg analysts James Seyffart and Eric Balchunas have projected a 90% chance of this landmark decision materializing, a move that underscores the SEC’s progressive stance under Chairman Gary Gensler’s leadership.
The Bitcoin ETF Is Coming: 5 Things To Watch This Week
Nate Geraci, President of the ETF Store and co-founder of the ETF Institute, shared his expert insights on the unfolding situation. “5 things I’m watching this week re: spot bitcoin ETFs…,” he stated and began with the critical nature of fee disclosures, especially from heavyweights like BlackRock and Grayscale. “Can’t overstate the importance of fees in this competition,” Geraci remarked, noting Fidelity’s lead with a 0.39% fee and Invesco’s close follow-up at 0.59%.
Geraci’s second focus is on the SEC’s approval vote. Currently, two more specific technical criteria need to be met for a spot-backed Bitcoin ETF before the SEC’s vote. Initially, the Securities and Exchange Commission (SEC) is required to authorize the 19b-4 filings submitted by the exchanges intending to list the ETFs. Subsequently, the regulator is also obligated to sanction the pertinent S-1 forms, which serve as the registration applications from the prospective issuers.
According to a Bloomberg report, issuers have until 8:00 am Monday to submit any last-minute revisions to their pending S-1s applications. Following this, SEC plans to vote on 19b-4s in the coming days. Geraci described the process: “SEC Division of Trading & Markets must approve 19b-4s, and Division of Corporate Finance must sign-off on S-1s.” But he expressed confidence in the approval, saying, “I expect 19b-4 approval orders.”
Third is the potential launch date. The market is also abuzz with speculations about the potential launch of these ETFs as early as Thursday. “ETFs could possibly launch on Thursday. If that happens, fascinated to see what type of investor $$ is already lined-up,” Geraci remarked and highlighted the investor money that is expected to flow into these ETFs, citing rumors of BlackRock entering with $2 billion and ARK possibly investing over $200 million.
A fourth critical aspect is whether Grayscale’s GBTC will convert or uplist on the same day as other ETF launches. Geraci believes so, basing his opinion on “tweets from execs, filings, & general actions/messaging.” He emphasized the significance of GBTC’s existing $27 billion in assets, which could instantly place it among the top ETFs by AUM upon launch.
The marketing strategies of these entities are also under Geraci’s watchful eye, especially given the restrictive ‘33 Act advertising rules. “We’ve already seen a preview with Bitwise, Hashdex, & VanEck… What does BlackRock, Fidelity, Invesco, ARK, Grayscale, & everyone else have in store?” Geraci questioned, expecting innovative approaches.
The Final Steps This Week
Bloomberg’s Seyffart agreed with Geraci’s points, singling out the fee competition as particularly captivating. “Agree with all this. In my mind. The fee war is far and away the most interesting aspect though. I guess that could change if Grayscale is held back in some way. But my base case is that it doesn’t happen,” he said, highlighting the intense rivalry expected in the sector.
Scott Johnsson, a finance lawyer at Davis Polk, offered his insights on the timeline and approval probabilities. His guess on timing is that on Monday the final S-1/3 get filed, “Wednesday: 19b-4 approval orders issued post-close, Thursday: Requests for acceleration from issuers, Friday: Notice of effectiveness filed from SEC, and Tuesday [next week]: Trading starts”
Best guess on timing (not definitive):– Monday: “Final” S-1/3 filed– Wednesday: 19b-4 approval orders issued post-close– Thursday: Requests for acceleration from issuers– Friday: Notice of effectiveness filed from SEC– Tuesday: Trading starts
— Scott Johnsson (@SGJohnsson) January 8, 2024
Johnsson also outlined a step-by-step progression, from the final S-1/3 filings to the eventual start of trading, attaching increasing probabilities of approval at each stage.Johnsson estimates the chances of approval:
Right now: 96-98%19b-4 approval: 99%Notice of effectiveness: 99.99%Trading: 100%.
In conclusion, this week stands as a watershed moment for Bitcoin ETFs in the US, with the SEC’s decisions on the 19b-4 filings and S-1 forms being the final hurdles. The culmination of these events could mark a significant evolution in Bitcoin’s integration into mainstream financial markets.
At press time, BTC traded at $44,006.
Featured image created with DALL·E 3, chart from TradingView.com
