Bitcoin Spot ETF Proposals to Be Rejected by SEC: Matrixport

Bitcoin Spot ETF Proposals to Be Rejected by SEC: Matrixport

“SEC Chair Gensler is not embracing crypto in the U.S., and it might even be a very long shot to expect that he would vote to approve bitcoin spot ETFs,” Matrixport said.

Crypto investment services provider Matrixport expects the U.S. Securities and Exchange Commission (SEC) to approve at least one application to list a spot bitcoin exchange-traded fund (ETF) this month.

The current five-person voting Commissioners leadership critical for the ETF approval of the SEC is dominated by Democrats, wrote the firm in a note on Wednesday.

However, SEC Chair Gensler is not embracing crypto in the U.S., and it might even be a very long shot to expect that he would vote to approve bitcoin spot ETFs.

In a recent blog post, Matrixport discusses the potential benefits of an ETF for the crypto market. According to the post, Gensler, a former chairman of the CFTC, believes that an ETF would help to legitimize Bitcoin as an investment.

However, political factors may prevent such a move from happening.

The bitcoin ETF that many people were eagerly waiting for finally got approved by the U.S. government, and this sent the price of bitcoin skyrocketing. In 2023, the price of bitcoin ended the year up 160% from where it started.

Matrixport has estimated that of the extra $14 billion of fiat and leverage deployed into crypto since September, $10 billion might be related to ETF expectation.

This is based on the assumption that a significant portion of the recent increase in volume and price is due to the anticipation of a crypto-based ETF being approved by the SEC.

If this is the case, the approval of a crypto-based ETF could lead to a large influx of new money into the market.

Reasons Why a Denial is Likely 

All Bitcoin spot ETF proposals have failed to meet a key requirement that the SEC might need to approve them, according to the Matrixport report.

The SEC’s ETF application review process is clearly flawed, as evidenced by the number of rejected applications. Despite meeting with SEC staff and submitting multiple applications, ETF applicants are still being denied. This is a major issue that must be addressed.

Matrixport is confident that its ETF proposals will be approved by the SEC by Q2 2024, but is preparing for the possibility that the SEC will reject all proposals in January.

Matrixport is skeptical that SEC chairman Gary Gensler will vote in favor of approving Bitcoin spot ETFs. The firm’s reasoning is based on Gensler’s December 2023 comments indicating a perceived need for more stringent compliance within the crypto industry.

The report argued that from a political standpoint, there is little incentive to greenlight a Bitcoin Spot ETF. This is because such regulatory endorsement would legitimize Bitcoin as a viable alternative store of value, and undermine the US dollar’s global hegemony.

Bloomberg Senior ETF Analyst Disagrees

Eric Balchunas, a senior ETF analyst for Bloomberg, doesn’t believe that the SEC will reject the proposal.

In a Wednesday tweet, Balchunas mentioned that he and other ETF analysts who have more insider knowledge have not come across any information indicating anything other than a potential green light.

He acknowledged the possibility of uncertainty but emphasized that such a turn of events would challenge a significant amount of reliable intelligence, making it a less likely scenario.

In other words, he believes that if this unlikely event were to happen, it would call into question a lot of what we know about the situation, making it less likely to actually happen.

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