Grayscale Bitcoin ETF won its Lawsuit against the SEC – Grayscale crypto: Grayscale just won its lawsuit against the SEC, Grayscale sued the SEC last year after the agency denied its application, arguing that the agency’s prior approval of bitcoin futures ETFs. The SEC last year denied Grayscale’s application to convert its spot Grayscale Bitcoin Trust (GBTC.PK) into an ETF.
Today, it was announced that the DC Circuit Court of Appeals is vacating SEC’s denial of Grayscale’s $GBTC conversion into a spot Bitcoin. Here’s everything you need to know now First let’s start with Grayscale.
Grayscale Bitcoin ETF won its Lawsuit against the SEC – Grayscale crypto:
Grayscale (Investment Management Company) launched Bitcoin ten years ago almost a decade and since then they have become the largest Bitcoin Fund in the world.
People all around the world who wanted Bitcoin exposure but didn’t want to go buy it through the spot Market could go on to one of the exchanges and they could buy the Bitcoin trust.
But it’s a trust it is not a true ETF The reason is that historically the SEC in the United States has not approved a Bitcoin spot ETF.
And so the trust was kind of a workaround it was a way for you to buy a public ticker and get exposure to bitcoin without actually having Grayscale go to the SEC and get that approval.
Now in recent years what we have seen is that the fund became very large over 40 billion dollars at one point sat inside that Bitcoin Trust.
Of course, Grayscale wanted to convert it to a Bitcoin spot ETF so they went ahead and applied converting a trust to an ETF.
It’s happened before there’s a process and the SEC’s got to approve it but the SEC denied Grayscale’s ability to go ahead and convert from a Bitcoin trust into a Bitcoin spot ETF.
Around the same time, the SEC also approved multiple futures-based Bitcoin ETFs. So they were not Spot ETS but they were Futures based ETFs.
Grayscale obviously was upset by this they wanted to be the first to get that Bitcoin spot ETF into the U.S. capital markets. Then they decided in what was somewhat of a controversial move to sue the SEC.
Now the SEC not only does not appreciate that Grayscale was disagreeing with them they also probably didn’t appreciate that Grayscale was suing them as well.
But now this is part of the beauty of America is that we have both sides the market participant in grayscale and the SEC the regulator go into court and they lay out their arguments and in doing so what it allows for.
Bitcoin traders wipe Grayscale gains after SEC delays spot ETF decisions
Does it allow for the Democratic capitalistic process of American courts and the legal system to work itself out and so now the SEC has been told no grayscale is correct in this specific situation?
This doesn’t mean that he’s wrong all the time and it doesn’t mean that market participants are right all the time.
But what it does mean is that both parties went into a court of law and they went ahead and they laid out all of their arguments.
The court decided that they are going to support what Grayscale is arguing and so what that means is that the SEC now has to vacate the previous denial they have to go back.
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And have to re-evaluate the application to convert from a Bitcoin trust into a Bitcoin ETF now that does not guarantee that the SEC is going to all of a sudden wave a magic wand into the grayscale.
It has the Bitcoin spot ETF Remember there are many other applications that have been put forward including kind of the elephant in the room which is Blackrock is now competing with grayscale.
It’s somewhat of a foot race to see who can be the first to get a Bitcoin spot ETF approved. Now why does it matter whether you are the first or not?
Well, being the first is actually really important because what we have seen in the past take for example the Futures-based ETFs the person who got out first or the group that got out first they’re the ones who get most of the assets.
Grayscale versus BlackRock:
And so when you look at Grayscale versus BlackRock, BlackRock has better distribution BlackRock has a bigger name and frankly BlackRock has more trust in the institutional world than Grayscale or any other crypto-related asset manager.
And so being able to get out into the market first would be a huge advantage for what some see as David versus Goliath.
But if all of a sudden the SEC just said you know what green light everyone gets approved at the same time then it really is going to come down to where do those assets flow.
Well, we have seen over the years that when an ETF gets approved and is able to capture assets.
If there is an early winner in that category usually the upstarts are not able to unseat who that winner is and so getting out first into the market is really important.
Especially with an asset class like Bitcoin and cryptocurrencies where there seems to be a bunch of pent-up demand people waiting to allocate to the space. But there is no spot ETF and literally being the first pays off here.
Grayscale Investment Management Company
Now the reason why it’s important that the courts made this decision is we are leaving the world of opinions kind of hot takes on the internet.
And we are now getting into the courts and the courts are able to decide what actually has to happen they can enforce these rules.
And so by saying to the SEC you have to vacate that denial and go back and reevaluate the SEC still retains the right to deny the conversion of grayscales.
Bitcoin trust into a spot Bitcoin ETF for any other reason they have a whole plethora of things that they could bring up and say we are not going to approve this.
But my guess is that that’s unlikely to happen right we now have a court saying hey the reason that you gave initially is not sufficient enough you also have BlackRock coming in with the application you have people like Arc investing 21 shares you have Bitwise uh Invesco the list goes on and on.
And so my guess is that what’s going to happen here is we are getting closer and closer the odds have increased that a Bitcoin spot ETF is going to get approved in the United States.
Grayscale Can Be a Bitcoin ETF
There’s a report on Bloomberg today that says that actually, a decision on the application for BlackRock could happen as soon as this week.
Given the grayscale decision now all of a sudden it kind of puts a light onto this and we are starting to see people say Okay are we actually at the end?
Are we at the point the Bitcoin spot ETF is going to get approved I’m not sure but it does feel like we are much closer today than we were yesterday.
On top of that, there’s a big question of how many assets would actually flow into a Bitcoin spot ETF.
Some people think that it could be a couple hundred million dollars some people think it could be tens of billions of dollars.
Within the first month to three months, I wouldn’t be surprised if we saw over 10 billion dollars flowing into that asset.
Now why is that important when you start to think about one five ten billion dollars some of these asset managers out here have a trillion plus dollars.
It’s not that big but what it does show you is when you look at the Bitcoin Market the Bitcoin market cap is about half a trillion dollars.
If you were to go and get five billion dollars put into a Bitcoin spot ETF that’s one percent of the total market cap of the asset.
And then when you start to look at okay well what happens when it gets to 10 billion 25 billion 50 billion a hundred billion dollars?
If that’s possible now you start talking about anywhere between 10 to 20 percent of the total market cap.
Grayscale Bitcoin ETF Lawsuit:
Now obviously Bitcoin’s price is volatile it will move and as more money comes in it will probably push the price up given that Bitcoin is a finite asset.
But it does begin to speak to the fact that there is going to be a catalyst now when the Bitcoin spot ETF gets approved that is a catalyst for the market.
And what people have been saying is look the Market’s really illiquid seventy per cent of the Bitcoin in circulation hasn’t moved in over a year.
If you have got all this illiquidity in the market you need some sort of catalyst some sort of increase in demand in order to kick-start what is many people looking at kind of a potential increase in price in the future.
Maybe this Bitcoin spot ETF is that Catalyst if you have a Bitcoin spy ETF that gets approved then within less than one year you’re gonna have the Bitcoin having which means you are going to have a supply shock.
This is a demand shock this could be a rerun all over again of what we saw in 2020 when we had kind of a supply shock in the having and then we had a demand shock with all the free money that was dropping from the sky getting put into the market.
I don’t know what’s going to happen no one has a crystal ball but again the decision today that Grayscale is going to Prevail in this lawsuit against the SEC is definitely moving us one step closer to actually getting a Bitcoin spot ETF in the United States.
BlackRock obviously has got to be excited about this as well because it’s putting more pressure on the situation in order to get someone approved.
So that American investors can now get access to that Bitcoin spot ETF it’s going to be really interesting to watch how this plays out in the future. Follow us on Facebook.
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