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SEC delays decision on Grayscale's GBTC to ETF conversion after Ark Invest remission

  • US SEC has failed to provide a decision on Grayscale's application to have its GBTC converted to an ETF.
  • The asset manager's disappointment comes only days after Cathie Wood's Ark Invest suffered the same fate.
  • As market participants continue to hold out hope, experts say such approvals may not happen under current presidential and SEC regimes.

The US Securities and Exchange Commission (SEC) has delayed yet another decision relating to spot Bitcoin Exchange Traded Funds (ETFs). The delay disappoints market players, as the market would do well with a catalyst right now, and ETFs are touted as the most likely impulse to drive the market.

Also Read: Europe launches first spot Bitcoin ETF; US SEC likely to delay decision on BlackRock filing.

SEC disappoints Grayscale asset manager with ETF approval delay

The US SEC is in no rush to approve spot BTC ETF applications, letting down the country as Europe just launched its first one spearheaded by Jacobi Asset Management on the exchange Euronext Amsterdam. Contrary to expectation, the financial regulator has yet to decide on Grayscale's application to convert its Bitcoin Investment Trus (GBTC) into an ETF.

The asset manager had written an open letter to the SEC in late July, explaining its rationale for why the commission should approve all spot bitcoin ETF applications while appealing for its product.

When the SEC is ready to approve spot bitcoin ETF applications, there is simply no reason to keep GBTC investors from the spot bitcoin ETF they deserve. We will continue to advocate for this cause on behalf of our investors.

This matter is already in court, with Grayscale urging the court to instruct the regulator to convert its GBTC to a spot Bitcoin ETF. The asset manager's bone of contention is that the country's revenue system needs to include billions of dollars, as there are close to one million GBTC holders across the country's 50 states. With this expansiveness, converting its GBTC to an ETF would be beneficial.

After delaying decisions for Cathie Wood's Ark Invest and now Grayscale, market observers have pushed their hope two weeks forward, considering the following seven deadlines are slated for the first week of September.

BlackRock, Bitwise, VanEck, WisdomTree, Invesco, Fidelity, and Valkyrie remain on the waiting list, pending a September decision, but Global X will have to wait until October.

ETF specialist Eric Balchunas acknowledged the delay, appreciating that the traditional 160-day norm has been violated.  

Better chances with a new regime

Meanwhile, former SEC enforcement lawyer John Reed Stark is not losing breath waiting for an ETF approval this year. Based on recent remarks, the expert believes better chances lie with a different regime. Specifically, he says if the 2024 US Elections usher in a Republican president, the transition could see the Crypto Mom, Hester Pierce, take office to balance partisan scales between Democrats and Republicans.

In Stark's words:

Given her lengthy record of dissent and opposition to most crypto-related SEC actions, the world should expect that most US SEC crypto-related enforcement and most crypto-related SEC disruption would grind to a screeching halt… The crypto-regulatory tides could shift exponentially after Election Day.

With all signs pointing to a rematch between former US President Donald Trump of the Republican party, and current Democrat Joe Biden, it remains to be seen whether Stark's assertions will come true. Nevertheless, suppose there is any truth to Stark's assumption. In that case, the crypto market yearns for a time when the SEC will be more inclined to take crypto-friendly regulatory actions like reducing its enforcement efforts more broadly and demonstrating receptiveness to approving a spot BTC ETF. 

Open Interest, funding rate FAQs

How does Open Interest affect cryptocurrency prices?

Higher Open Interest is associated with higher liquidity and new capital inflow to the market. This is the equivalent of increased efficiency, and the ongoing trend continues. When Open Interest decreases, it is regarded as a sign of liquidation in the market, investors are leaving, and the overall demand for an asset is declining, fueling a bearish sentiment among investors.

How does the Funding rate affect cryptocurrency prices?

Funding fees bridge the difference between spot prices and prices of futures contracts of an asset by increasing liquidation risks faced by traders. A consistently high and positive funding rate implies a bullish sentiment among market participants and an expectation of a price hike. A consistently negative funding rate for an asset means a bearish view, indicating that traders expect the cryptocurrency’s price to fall, and a bearish trend reversal is likely to occur.

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Lockridge Okoth

Lockridge is a believer in the transformative power of crypto and the blockchain industry.

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