In a research report released on Monday, Bernstein said the SEC is under increasing pressure to greenlight such a product, specifically since the commission has already granted approval for futures-based bitcoin ETFs and leverage-based futures ETFs.
The reasoning behind these approvals is that futures pricing comes from regulated exchanges like the CME.
However, the SEC remains hesitant about spot Bitcoin ETFs due to concerns about the regulation of spot exchanges such as Coinbase and the potential for price manipulation, according to analysts led by Gautam Chhugani.
Despite receiving numerous applications, the SEC has yet to approve a spot Bitcoin ETF.
The Chicago Board Options Exchange (CBOE) also filed a bid with the SEC on behalf of Fidelity for a spot Bitcoin ETF.
However, the filings were returned by the SEC due to their lack of clarity and comprehensiveness.
SEC is Facing Grayscale’s Bid to Convert its GBTC to ETF
A notable development in this area is Grayscale’s bid to convert its Grayscale Bitcoin Trust (GBTC) into an ETF, which is currently awaiting a decision from an appeals court.
The analysts at Bernstein said that the court seemed skeptical about the argument that futures prices are not derived from spot prices.
“The court did not sound convinced that the futures price is not derived from the spot price, and thus to allow a futures based ETF and not allow spot sounds like a difficult pill to swallow for the courts,” the analysts wrote.
In response to regulatory concerns, the industry has proposed a surveillance agreement between spot exchange operators and regulated exchanges like Nasdaq.
This agreement would provide necessary oversight and monitoring, addressing the SEC’s worries about manipulation in the spot Bitcoin markets.
The absence of a Bitcoin spot ETF has led to the growth of over-the-counter (OTC) products like Grayscale’s Bitcoin Trust (GBTC).
Bernstein noted that these OTC products are more expensive, illiquid, and inefficient compared to ETFs.
In fact, GBTC has been trading at around a 40% discount to net asset value for years, prompting Grayscale to seek SEC approval for a Bitcoin ETF.
Grayscale has argued that the spot price of Bitcoin in both spot and futures ETFs is subject to the same risks, so it does not make sense to approve one product and not the other.
All in all, Bernstein believes that the SEC’s stance on spot Bitcoin ETFs may soon change.
With the growing interest from asset managers and the industry’s proposed surveillance agreement, there is a strong likelihood that the US will approve a spot Bitcoin ETF in the near future.
“SEC would rather bring in a regulated bitcoin ETF led by more mainstream Wall Street participants and with surveillance from existing regulated exchanges, than having to deal with a Grayscale OTC product filling the institutional gap,” the report said.
Bernstein, a global investment research and management firm, recently published a report that said the U.S. Securities and Exchange Commission (SEC) is likely to approve a spot Bitcoin ETF in the near future.
The report cited several factors that support this conclusion, including the SEC’s recent approval of futures-based Bitcoin ETFs, the growing interest from institutional investors in Bitcoin, and the development of new surveillance tools that could help to mitigate the risk of market manipulation.
Of course, there is no guarantee that the SEC will approve a spot Bitcoin ETF. However, the Bernstein report suggests that the odds are in favor of approval. If this happens, it could have a significant impact on the price of Bitcoin and the wider cryptocurrency market.
Here are some of the reasons why Bernstein believes the SEC is likely to approve a spot Bitcoin ETF:
- The SEC has already approved futures-based Bitcoin ETFs, which suggests that the agency is not fundamentally opposed to the idea of a Bitcoin ETF.
- Institutional investors are increasingly interested in Bitcoin, and a spot Bitcoin ETF would make it easier for them to invest in the asset.
- New surveillance tools are being developed that could help to mitigate the risk of market manipulation.
Of course, there are also some reasons why the SEC might not approve a spot Bitcoin ETF. These include concerns about market manipulation and the lack of regulation in the cryptocurrency space.
However, Bernstein believes that the SEC is likely to weigh the potential benefits of a spot Bitcoin ETF against the potential risks and ultimately decide to approve it. If this happens, it could have a significant impact on the price of Bitcoin and the wider cryptocurrency market.