Less than 48 hours of "bull market": SEC delays Bitcoin ETF, market drops in response
Original | Odaily
Author | Loopy Lu
On August 30, Grayscale won the lawsuit against the SEC. The market responded with a sharp rise, and Bitcoin briefly surpassed $28,000. With Grayscale's legal victory, people have high hopes for the approval of a Bitcoin ETF in the United States, and this "ambition" in the crypto world seems within reach. Odaily subsequently followed up with reporting and analysis: "Different Perspectives: How Far is the Bitcoin Spot ETF after Grayscale's Victory?" and "Interpretation: Despite Grayscale's Victory, SEC can still deny BTC ETF".
However, shortly after the good news of Grayscale's victory, a sudden change occurred within 48 hours.
The U.S. Securities and Exchange Commission announced today that they need to delay the approval of a Bitcoin spot ETF, and at least three spot ETFs proposed by WisdomTree, Valkyrie, and Invesco have been delayed. The decision on the products will be pushed back to mid-October at the earliest.
Tomorrow, Again Tomorrow, How Many Tomorrows
This is not the first time recently that the SEC has delayed a Bitcoin ETF.
In mid-June, BlackRock submitted an application for a Bitcoin spot ETF, which triggered a clear bullish sentiment in the cryptocurrency market. In late July, the SEC began reviewing whether to approve or reject the listing applications of six Bitcoin spot ETFs, including BlackRock. (Odaily Note: Specifically, they include the BlackRock iShares Bitcoin Trust, Fidelity Wise Origin Bitcoin Trust, WisdomTree Bitcoin Trust, VanEck Bitcoin Strategy ETF, and ProShares Galaxy Bitcoin ETF.)
Generally speaking, after being published in the Federal Register, the SEC will formally initiate the review. The review period is default to only 45 days. However, the review period can be extended.
Therefore, postponing the review result has become a trick that the SEC is "always trying and never failing".
This year's "ETF wave" can be traced back to ARK, also known as "Wood Sister". As early as May 15th, ARK 21 Shares Bitcoin ETF had already been published in the Federal Register. BlackRock, which manages over $9 trillion, also applied for a Bitcoin ETF in June, causing a small excitement in the industry. The U.S. Securities and Exchange Commission announced the fund's proposal in the Federal Register on July 19th, starting the 45-day countdown for the committee to make a decision on the product.
However, until now, the SEC has not made a decision on these ETFs.
On August 11th, the SEC once again extended the review time for the Bitcoin ETF applications from Ark Investment Management and 21 Shares. According to the SEC's review rules, the review can be extended for up to 240 days.
Of course, the ETF application that was postponed today is similar. The SEC document stated that the ETF application from WisdomTree has been postponed to October 17th.
It seems that the SEC is just trying to delay making a final decision and has not given a specific reason for the postponement. "The Commission believes that designating a longer period is appropriate to provide sufficient time for the consideration of the proposed rule change and the issues raised therein."
Confusing Market Direction amidst the Market Downturn
With the continuous delay from SEC, the market has made pessimistic predictions about the overall situation.
According to Coinglass data, Bitcoin liquidation reached 48.89 million USD in the past 24 hours, while ETH liquidation reached 28.76 million USD.
During the longest review period of 240 days, there are some key milestones that decisions have to be made: 45 days, 45 days, 90 days, 60 days. If SEC delays 3 times, a final decision will have to be made - approval or rejection. After 240 days, SEC will not be able to delay the decision anymore according to the procedure.
The change in market expectations has also drawn a perfect "door" shape for the candlestick chart, with bitcoin price dipping below $26,000 at one point. People can't help but wonder when the matter of ETF will finally be settled.
Even before this delay, some analysts had predicted its occurrence. Bloomberg analyst James Seyffart said on August 15th that he believed the review deadline in early September might not bring about a decision. He believed this review would inevitably be pushed back, and he is now focusing more on the final deadline of January 10th.
Grayscale's legal victory and whale profits
From the market trend, Grayscale's legal victory is a high point in this round of ETF discussions that has strongly stimulated the market.
However, as the truth gradually becomes clear, people are beginning to question whether Grayscale's legal victory is truly a victory for BTC. Although Grayscale has won a legal victory over the SEC, it does not mean that Grayscale's GBTC will be allowed to convert into a spot ETF.
Bloomberg TV analyst Sonali Basak said, "This does not mean GBTC will immediately convert to an ETF. As the court said, it only means that the U.S. SEC has failed to explain why it approved bitcoin futures ETPs instead of the product proposed by Grayscale (a spot ETF)." She added that there is still a long process ahead, including a 45-day appeals period, during which both sides will review the ruling, and the SEC can also request a full hearing. "It is currently unclear whether Grayscale needs to resubmit its application to convert GBTC into an ETF."
Simply put, the court only believes that the SEC's rejection of Grayscale's process is not in compliance with the rules. After going through the review process again, the SEC can still reject Grayscale's application using other reasons. However, such a news piece with ambiguous meaning has brought about strong excitement in the market.
And when we turn our attention back to before Grayscale's legal victory, it is not difficult to see that whales were continuously positioning themselves and making significant profits.
Santiment monitoring data shows that wallets holding 10-10000 BTC increased their holdings by nearly $400 million in BTC the day before the news of Grayscale's victory was announced. Despite the lack of evidence, people still suspect that whale addresses may have had prior knowledge of the outcome of the Grayscale-SEC lawsuit based on their trading activity.
Grayscale's victory seems to have created an opportunity for whales to exit. Prior to Grayscale's victory, nearly 30,000 BTC were transferred to CEX, with a market value of $822 million.
August 29th, Wu Jihan's cryptocurrency company Matrixport's research director Markus Thielen said, "We will long Bitcoin and strictly stop-loss. It is expected that the US government bond yield will decrease, and US technology stocks will rise."
"buy the rumor, sell the news"
Following the news for trading is always risky, as it is difficult for people to immediately react to trading at the first moment the news is disclosed.
In just 48 hours, the market has experienced ups and downs and returned to the original point. A group of whales may have already made profits, while another group of retail investors has experienced significant margin calls.
Eric Balchunas, a senior ETF analyst at Bloomberg, believes that he wouldn't be surprised if the SEC delays the ETF application. He believes that the timeline for the review period is not important. "The SEC still has the possibility of making concessions at some point, and we will eventually see these applications approved." He predicts that the probability of a Bitcoin spot ETF launching this year is 75%, and the probability of it launching by the end of 2024 is as high as 95%.
With the end of the impact of the ETF, the market is once again heading towards pessimism. Although many people believe that the approval of a Bitcoin spot ETF could bring a huge surge to the market, this event is still far away.
As we enter September, the market is once again turning negative. Historically, September has been the worst-performing month for Bitcoin. Since 2013, there have only been two profitable Septembers (in 2015 and 2016), while the rest of the years have resulted in losses.
Perhaps we still need to have more patience with the overall market trend. September has no potential major positive events expected, but in October, the potential approval of Ethereum futures ETF could be the next major event to drive the market.
