Spot bitcoin ETF approval unlikely this year, says analyst

Watch: Spot bitcoin ETF approval unlikely this year, says analyst | The Crypto Mile

Approval of a spot bitcoin ETF is unlikely this year, according to an analyst. Optimism surged in the crypto-sector last week after Grayscale's legal win against the US Securities and Exchange Commission (SEC) fed hopes that an ETF approval was forthcoming.

However, the SEC has since extended its decision deadline on seven ETF filings by 45 days, dampening investor anticipation and driving the bitcoin price below $26,000 (£20,726).

In this week's episode of Yahoo Finance's The Crypto Mile, Lory Kehoe, former Coinbase director (COIN), head of Blockchain Ireland, and adjunct professor at Trinity College Dublin, discusses the likelihood of a spot bitcoin ETF approval and why the crypto-sector needs one.

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"The possibility of a spot bitcoin ETF filing getting SEC approval is an area that is getting an increased level of media interest. I think the SEC takes all that on board, but is not afraid to stick to its guns and make its own decisions," Kehoe said.

"My take is that its more likely to happen and be approved in 2024 as more analysis and due diligence takes place over the remainder of this year," the head of Blockchain Ireland added. However, Kehoe stressed he'd “be happy to be wrong on this and see it approved in 2023”.

Bitcoin (BTC-USD) has fallen 1.1% in the past 24 hours and is currently changing hands for $25,713 (£20,494), according to CoinGecko. The world's largest digital asset by market capitalisation increased over $28,100 last Tuesday, on news that Grayscale Investments had won a key legal battle in its struggle to convert the Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF).

On August 29, Judge Neomi Rao of the US District of Columbia Court of Appeals ruled that the SEC was incorrect in rejecting Grayscale’s application to convert GBTC into a spot ETF. The SEC had initially rejected the application in June 2022, citing insufficient safe practices and fraud protection mechanisms.

Ongoing Concerns Over Market Manipulation

According to Kehoe, one of the key considerations for the SEC is market manipulation, aligning with the regulator's core mandate of investor protection and financial oversight. "When the SEC feels that this is a normal functioning market, or a market that meets their criteria, then a spot bitcoin ETF will tick that box and hopefully be approved," he added.

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He underscored that this case is closely watched not just by Grayscale and its investors, but also by the broader crypto and asset management communities. "An approval would be a material and significant moment in crypto's history and in bitcoin's history," Kehoe remarked.

Why does the crypto-sector need a spot bitcoin ETF?

A spot bitcoin ETF is a financial product that investors hope will open the gateway for mainstream capital to flood the crypto market. When asked by Yahoo Finance UK why the crypto industry needs a spot bitcoin ETF, Kehoe highlighted multiple benefits:

  1. Regulatory Oversight: An ETF would be under SEC jurisdiction, lending it credibility.

  2. Retail Accessibility: ETFs are more accessible to the general public, opening the door to more widespread bitcoin investment.

  3. Investor Protection: The SEC’s role in ensuring that the financial product meets rigorous standards enhances its appeal.

  4. Institutional Adoption: With the potential for significant investments from pension and mutual funds, an approved spot bitcoin ETF could funnel billions into the crypto market.

The SEC has now been ordered to review its prior rejection of Grayscale’s application, and both parties were given 45 days to appeal the recent court ruling. The decision could then move to the US Supreme Court or undergo an en banc panel review. With the clock ticking and the financial world watching, the approval of a spot bitcoin ETF would not only signify a major breakthrough for Grayscale but would also likely act as a catalyst for the wider adoption of cryptocurrencies.

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