Crypto Assets Slump as SEC Delays Decision on Spot Bitcoin ETFs

Updated: 01 September 2023

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Crypto assets slumped after the Securities and Exchange Commission (SEC) delayed decisions on applications for seven spot Bitcoin ETFs, souring sentiment just days after a Grayscale Investments court victory had buoyed optimism.

Bitcoin is down 4.6% in the past 24 hours, while Ethereum lost 3.6%. Bitcoin Cash plunged 7.3% and XRP was down more than 4% after the SEC again delayed making a decision on spot Bitcoin ETF applications from Bitwise, Blackrock, Fidelity, Valkyrie, VanEck, WisdomTree, and a joint application by Invesco and Galaxy.

While analysts had predicted the delay, some investors had become more optimistic about early approvals following Grayscale’s landmark legal win against the SEC earlier this week. Grayscale’s win came as the crypto asset manager moved to convert its over-the-counter Grayscale Bitcoin Trust (GBTC) into a listed spot Bitcoin ETF. The court ordered the company’s petition for review be granted with the judge saying the SEC’s earlier decision to block it was “arbitrary and capricious.”

NEW: @JSeyff & I are upping our odds to 75% of spot bitcoin ETFs launching this yr (95% by end of '24). While we factored Grayscale win into our prev 65% odds, the unanimity & decisiveness of ruling was beyond expectations and leaves SEC w "very little wiggle room" via @NYCStein pic.twitter.com/IyEGmWjuHa

— Eric Balchunas (@EricBalchunas) August 30, 2023

The judge also said that the SEC’s rejection of the ETF was inconsistent with its decision to approve Bitcoin futures ETFs, given that the Bitcoin spot and futures market prices are 99.9% correlated. The crypto asset manager had argued that its ETF was “materially similar” to approved Bitcoin futures ETFs.

Spot Bitcoin ETF Approval May Fuel $30 Billion Extra Demand

The stakes are off the chart for the crypto industry because approval of a spot Bitcoin ETF backed by blue chip investment firms including BlackRock and Fidelity would represent a landmark breakthrough for the nascent asset class that would ripple through the crypto ecosystem. New York Digital Investment Group (NYDIG) has predicted that the approval of Spot Bitcoin ETFs could result in an influx of $30 billion in new demand for Bitcoin.

Bitcoin jumped to $27,900 as traders reacted to news of Grayscale’s win and the broader crypto market gained after the ruling. Those gains have been erased in the last 24 hours.

We’ve now fully retraced back to pre SEC Grayscale Lawsuit Bitcoin price.

Pretty much sums up where the markets at right now. pic.twitter.com/PS4T12uHFh

— Ben Simpson (@bensimpsonau) August 31, 2023

The SEC is extending the period for public feedback on the applications with some approvals now possible in October. But the regulator has 240 days from when the applications were filed to decide, placing the final deadlines at around mid-March 2024.

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