Matthew Sigel, VanEck’s head of crypto research, recently took to Twitter to question the SEC’s refusal to authorize a spot Bitcoin ETF.

Matthew Sigel, the head of crypto research at VanEck, wrote a lengthy commentary last week and shared it on his personal Twitter account. In it, he questioned why the SEC has steadfastly declining to authorize an ETF on spot Bitcoin.

In spite of the fact that the US government body that regulates the securities market has previously given the go-ahead for a number of ETFs based on Bitcoin futures contracts, it has not yet done so for any that are directly collateralized in BTC.

Sigel enquired

Sigel notes that the IPO of Coinbase, a business that holds Bitcoin and other cryptocurrencies on behalf of its customers, was permitted by the SEC in 2021, despite the fact that these are in fact two different funds, particularly in terms of collateral and its custody.

In other words, the custody of BTC did not prohibit the same corporation from approving Coinbase’s listing, despite the fact that it appears to be preventing the SEC from approving an ETF on spot Bitcoin.

It can occasionally be convenient to outsource token custody to third parties qualified for such a purpose, Sigel adds, since self-custody of tokens is not always the best option.

He also notes that in 2017, VanEck submitted his initial application to the SEC for approval of an ETF based on derivatives for the Bitcoin currency.

To be fair, the head of crypto research at VanEck acknowledges that the SEC’s justification for refusing to want to approve an ETF on spot Bitcoin is that there would be fraud and manipulation risks specifically in the BTC spot market due to the lack of a thorough oversight sharing agreement among crypto exchanges, whose prices determine the ETF’s benchmark.

BlackRock’s pivotal moment

In this context, Sigel hypothesizes that BlackRock’s most recent attempt to convince the SEC to accept an ETF on spot Bitcoin may be the result of collaboration with Coinbase or a shift in the exchange’s strategy.

It is important to note that the SEC has been actively targeting the largest US crypto exchange for the past few months, and the ongoing legal action may finally result in a settlement.

According to Sigel, functioning as a custodian for a significant issuer like Blackrock may have persuaded Coinbase to reveal information that it had previously been reluctant to do so. Additionally, he thinks that with the involvement of additional exchanges, surveillance arrangements might be systematized at this point.

To put it another way, BlackRock’s immense commercial and financial influence may have persuaded cryptocurrency exchanges—primarily Coinbase—to take action to make the cryptocurrency spot markets more regulated and less susceptible to manipulation, to the point where one of the SEC’s objections has been dropped.

The possibility that the SEC will eventually approve an ETF on spot Bitcoin is theoretically slightly higher at this moment.

The significance of the spot Bitcoin ETF, says VanEck

The crypto markets may be significantly impacted by an ETF collateralized with BTC.

The key point is that, unlike ETFs based on derivatives, a fund of this nature would need to purchase enough BTC in the market to cover all the shares issued.

Therefore, if it were to be extremely successful, it would need to significantly raise the number of shares issued and, as a result, the amount of BTC held as collateral.

It is not implausible to think that ETFs on spot Bitcoin could necessitate enormous volumes of BTC purchases in the spot markets to the point where they could even affect its prices, given that BlackRock is a giant with about 8.6 trillion in AUM (Assets Under Management) and given that the total market capitalization of Bitcoin does not reach $600 billion.

Additionally, if the SEC accepts BlackRock’s ETF, it might be pushed to allow additional ones, which might result in a sharp increase in the price of BTC.

But it all depends on how well these ETFs perform on the market, particularly on how many investors they can draw who are currently avoiding the crypto markets.

It’s important to note that the current theory holds that all of this might occur in 2024, the year of Bitcoin’s fourth halving. The year after each of the previous three halvings, a bull run began.

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