The next two weeks will be exciting for the bitcoin price. Many investors have circled July 1 and 6 in red (or green) in their calendars. On those two days, the US financial watchdog SEC will determine whether bitcoin-based ETFs may enter the market.
In this article, we look at Grayscale’s filing, whose SEC approval or disapproval deadline is July 6. Upon approval, Grayscale will convert its own GBTC into a spot bitcoin ETF. They expect a good result as they are already getting help from Wall Street firms Jane Street and Virtu to legally convert their fund into an ETF. Still, Grayscale says it’s preparing for “all possible scenarios.”
Converting bitcoin fund Grayscale
Currently, Grayscale offers different funds for different cryptocurrencies. The most important is the Grayscale Bitcoin Trust (GBTC) and so it is being converted into an ETF by the grace of the SEC. That is exceptional, because most of the applications that come in to the SEC for a bitcoin ETF, do not yet have a comparable product ready.
Grayscale has already proven to be able to manage a popular bitcoin product for institutional investors, so hopefully that will give them an advantage. It is certainly not the attitude of CEO Michael Sonnenshein. He says the company is “unequivocally committed” to the conversion.
Of great importance on bitcoin price
The Securities and Exchange Commission has several times postponed a decision on GBTC’s conversion. There is therefore something at stake as, if approved, this will become the first available spot-based bitcoin ETF in the US. This means that for every share in this ETF Grayscale must buy real bitcoins in the normal market.
The US is the largest financial market in the world so this could have a major impact on the bitcoin price† It makes it easier for institutional investors to invest in bitcoin, without having to manage bitcoin for their customers themselves.
This ETF is different from others
The SEC has rejected similar proposals from other financial institutions in the past, mostly due to concerns about market manipulation and a lack of agreements to share oversight of the underlying market. Those that have been approved differ drastically from Grayscale’s proposal. These already approved ETFs are based on futures contracts on bitcoin and not based on the underlying spot market.
Grayscale enforced their application in a letter to the SEC argue that the difference in treatment between spot and futures products could constitute a violation of the Administrative Procedures Act.
All possible scenarios
Yesterday CEO Sonnenshein sent a letter to investorsthat while the company has been encouraged by the SEC’s actions over the past eight months, it is preparing for “all possible scenarios after the ruling.”
“Most importantly, GBTC will be operationally ready to convert to an ETF once we get the appropriate regulatory approvals,” the letter said.
Grayscale has announced a deal with Wall Street firms Jane Street and Virtu Financial to help convert GBTC into an ETF, the deal will not take effect until the product is approved.
Should approval fail, Grayscale will investigate options, as SEC to sue.
“We have created the strongest legal team possible to help us articulate the importance of this matter.”