JPMorgan Expects Several Spot Bitcoin ETFs Approved by US SEC, SEPT 2023

07/09/2023

JPMorgan analyst Nikolaos Panigirtzoglou explained in a note last week that the U.S. Securities and Exchange Commission (SEC) may be forced to approve several spot bitcoin exchange-traded funds (ETFs) after a court ruled in favor of Grayscale Investments regarding the crypto asset manager’s proposal to convert its bitcoin trust into a spot bitcoin ETF.

“The court ruling on the Grayscale case against the SEC has boosted crypto markets optimism,” the JPMorgan analyst wrote, elaborating:

With this decision following on from the recent SEC vs. Ripple court decision, it has in turn raised optimism that the SEC crackdown against crypto companies, that has been very intense since the beginning of the year, would lessen going forward as the SEC faces legal challenges.

“The most important element of the Grayscale vs. SEC court ruling was that the denial by SEC (of Grayscale’s proposal to convert its closed-end bitcoin trust to spot bitcoin ETF) was ‘arbitrary and capricious because the Commission failed to explain its different treatment of similar products’ i.e. futures-based bitcoin ETFs,” Panigirtzoglou detailed.

“Effectively the court argued that fraud and manipulation in the bitcoin spot market pose a similar risk to both futures and spot products because the spot bitcoin market and the CME bitcoin futures market are tightly correlated. Therefore the court ruled that there was no justification for the SEC to be allowing bitcoin futures-based ETFs but deny spot bitcoin ETFs,” the analyst described.

Panigirtzoglou stressed: “This is highly significant because it implies that for the SEC to defend its denial of Grayscale’s proposal to convert its closed-end bitcoin trust to spot bitcoin ETF, it would have to retroactively withdraw its previous approval of futures-based bitcoin ETFs.”

He stated that this “looks unlikely in our mind” because “Such a retroactive withdrawal would be very disruptive and embarrassing for the SEC.” The JPMorgan analyst added:

Instead it looks more likely that the SEC would be forced to approve the spot bitcoin ETF applications that are still pending from several asset managers including that from Grayscale.

“The recent postponement to October ’23 of the SEC decision on pending spot bitcoin ETF applications, likely points to approval of multiple spot bitcoin ETF applications at once rather than granting a first mover advantage to any single applicant,” he further said. “That could be beneficial for investors as it would allow for more competition in terms of ETF fees. Grayscale will likely face even bigger pressure to lower fees if its trust gets approval to be converted to the largest bitcoin spot ETF in the world.”

©2024 MNK CAPITAL MANAGEMENT LTD. All rights reserved | This website is under the operation of MNK CAPITAL MANAGEMENT LTD which is licensed by the Cyprus Securities and Exchange Commission (license No. AIFM 60/56/2013).

MNK CAPITAL MANAGEMENT LTD (“Company”) is authorized and regulated by the Cyprus Securities and Exchange Commission (“CySEC”) with authorization number AIFM  60/56/2013. The information contained on this website is provided for general information and does not constitute an offering or legal or other professional advice, nor does it constitute any form of personal recommendation. Accordingly, information on this website is merely intended to raise awareness of issues relating to the Company’s business and by accessing this information you shall be deemed to accept and agree to be bound by the terms of this notice. Information contained on this website is subject to change without notice. It is therefore advisable that the user reviews this Disclaimer and any other notices on this website on a regular basis so that the user is aware of any such amendments of modifications. The distribution of information contained within this website may be restricted in certain jurisdictions by law or regulation and, accordingly, parties who access it are required to inform themselves of any comply with any such restrictions that might apply. Parties interested in accepting any service detailed within this website should inform themselves as to: (i) the legal and regulatory requirements within their country of nationality, residence or domicile; (ii) the tax consequences which might be relevant to the Company’s fund management services; and (iii) any other requirement or restriction which they may encounter. Therefore, the use of any information of materials on this website is entirely at your own risk, for which we expressly exclude liability to the fullest extent permitted by law. It shall be your own responsibility to ensure that any services or information available through this website meet your specific local requirements and/or restrictions. The entire contents of https://mnkcapitalmanagement.com/ are subject to copyright with all rights reserved. You may download or print individual sections of the site for your personal use and information only provided that you retain all copyright and other proprietary notices. You may not reproduce (in whole or in part), transmit (by electronic means or otherwise), modify, link into or use for any public or commercial purpose the site without the prior written permission of the Company. The information contained withing this website is of a general nature and further information should be sought by contacting us with your specific requirements. This website uses cookies. If you continue without changing your settings, we will assume that you are happy to receive all cookies on this website.