The Securities and Exchange Commission (SEC) is expected to approve the eagerly awaited spot bitcoin exchange-traded fund (ETF) as early as this month, according to Steven McClurg, the chief investment officer at Valkyrie. Bitcoin’s value has doubled since the start of 2023 as investors anticipate the approval of a spot ETF. Unlike existing bitcoin futures ETFs, a spot bitcoin ETF directly holds the digital currency. This approval has been sought by major financial institutions, including BlackRock, Fidelity, ARK Invest, and Grayscale, after facing previous denials from the SEC over concerns of potential market manipulation and pricing sources.
Potential Approval and Launch
McClurg predicts that the SEC will provide another round of comments to the applicants within the next few weeks, followed by potential approval of rule changes by November. He believes that a late November approval could lead to a fund launch in February. McClurg stated in an interview, “Before anything else happens, we get a second round of comments, and I believe we’ll probably get those comments in the next one to three weeks. A late November approval likely means a February launch.” After the rule changes are authorized, firms still need to submit registration forms.
Market Outlook
Experts anticipate significant inflows into spot bitcoin ETFs post-launch. McClurg forecasts that up to $10 billion could flow into these funds within the first 1-2 months. Matt Hougan, the CIO of Bitwise Asset Management, estimates that the funds could attract over $50 billion in cumulative inflows over five years, with a heavier concentration in later years. However, caution is still advised until the filings receive full approval.
“It feels like we’re in the red zone, to use a football analogy,”
Despite past denials from the SEC, significant progress has been made regarding market manipulation and custody concerns. Recent amendments to spot bitcoin ETF applications have addressed risk disclosures, underlying benchmark sources, pricing methodology, custodial arrangements, and other specifics per SEC requests. McClurg believes that these years-long debates have generally subsided, but others caution that potential manipulation and pricing concerns may still pose roadblocks.
Investors eagerly await the SEC’s next moves as the demand for spot bitcoin ETFs becomes clear. The approval of these funds has the potential to unleash a flood of new investment into the crypto market, which has already seen significant price rallies and garnered interest from heavyweight investors.
