Grayscale’s recent SEC victory is reshaping the crypto market. Discover its immediate effects and long-term implications.
Grayscale successfully sued the SEC last week over the latter’s denial of its request to authorize a spot bitcoin ETF. This triumph might affect the cryptocurrency market significantly, and not just in the long run.
Bitcoin ETFs are approved after Grayscale’s triumph
The SEC might finally be compelled to allow spot bitcoin ETFs as the first effect.
Recall that the SEC has only yet approved ETFs in the US that are based on contracts for the future price of bitcoin; so-called spot bitcoin ETFs are not yet approved.
Spot bitcoin ETFs have also been authorized in other nations, notably Canada, which is next door.
The Southern District Court of New York’s decision, which granted Grayscale the ability to do so, in essence directed the SEC to approve the application if all conditions and legal requirements are satisfied.
Many people think that the SEC is now facing an impossible situation; JPMorgan, for instance, claims that the agency will likely be forced to approve many of the applications.
In fact, the court specifically disclaims that the SEC’s previous justifications for rejecting the application should be taken into consideration, and it declares that the SEC’s position is arbitrary and inherently unfair.
But in reality, there is nothing to suggest that the SEC won’t proceed as usual, take its time, and postpone the judgment as long as possible, as it did on Friday.
The delay, according to JPMorgan’s analysts, is likely a sign that the SEC may accept numerous applications concurrently in order to avoid first-mover advantages.
When the agency is forced to choose, it is anticipated that it will choose mass approval.
The arrival of bitcoin ETFs following Grayscale’s triumph represents a capital infusion
One characteristic of spot Bitcoin ETFs makes them quite appealing to investors.
They require the physical delivery of an amount of BTC equal to the value of the issued shares because they are directly backed by BTC.
The more shares they sell, the more Bitcoin they must purchase on the open market in order to immobilize them.
This should lower the market’s supply and probably raise the price.
Anthony Pompliano estimates that two billion dollars will be invested in spot bitcoin exchange-traded funds, which would result in the removal of up to 77,000 bitcoins from the market.
While the exact effects of such inflows on the price of BTC cannot be predicted, it is possible that they could have a considerable impact at this particular time.
The scarcity of supplies
Currently, things are really bizarre.
The amount of BTC on exchanges is at its lowest point in years, in part because many holders decided it would be best not to leave their bitcoin on exchanges in the wake of the many failures of 2022.
Additionally, exchange volumes are extremely low, and these two factors combined can cause even a modest capital inflow to quickly disturb the fragile equilibrium between supply and demand.
This indicates that a sizable influx of cash might dramatically boost the already very low demand and consequently exert pressure on pricing.
The timeline is uncertain, not least because the two billion Pompliano mentions would not arrive in one lump sum when the ETFs are approved.
Bitcoin’s halving
In April of next year, which is less than eight months away, there will be the fourth Bitcoin halving, which is anticipated to decrease the supply of BTC on the market by halving the miner’s profits in one fell swoop.
The ETFs will be approved soon before the halving even though they were supposed to be approved by February or March 2024 at the latest. Therefore, the $2 billion in influxes they potentially bring in could happen concurrently with the halving or right after.
A bull run often begins a few months following the halving.
The bull run began in early 2013, after the initial halving took place in September 2012.
After the second halving in July 2016, the bull run began in early 2017.
In that year, the bull run began in November, and the third halving took place in May.
Even if historical data is by no means sufficient to foretell the future, it is feasible that, if the past repeats itself, a similar scenario might spark a fresh bull run in 2024.
It is unclear, though, if bitcoin’s market value will have increased, decreased, or stayed the same throughout that time.
