Crypto Just Scored a Major Victory Against the SEC
Let’s just go ahead and say that this ETF does get approved. If so, what would actually happen?
In a pivotal ruling for the crypto industry, the U.S. Court of Appeals for the D.C. Circuit unanimously sided with Grayscale Investments over its dispute with the SEC to convert its Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF.
Here's the most important line from the judge's ruling:
In the judges view, the SEC has inconsistently rejected spot Bitcoin ETFs, particularly those from Grayscale, employing criteria that deviates far away from their historical practices for approving similar products.
This undermines the SEC creditability big time… and significantly heightens the chance of a spot BTC ETF approval in the near future.
As result, Bitcoin’s price spiked more than 5% on the news.
There is no doubt about it – this is a major win for crypto as a whole and Grayscale more specifically.
But the battle isn’t over, as we highly doubt the SEC goes down without a fight.
As of today, the SEC now must re-review Grayscale’s ETF proposal. In the meantime, the SEC can make one of three decisions:
Approve the application
Pick a different reason to deny Grayscale's proposal and force more long and costly litigation
Request an en banc hearing – a very rare situation in which all three judges attend a rehearing. The SEC would have to request this within the next 45 days.
So, today, crypto celebrates. Tomorrow, the fight continues…
Here are some thoughtful opinions/threads on the matter:
1/ Grayscale's victory over the SEC is *massive.*
It's very rare for a federal circuit court to find that an agency has violated the APA by acting arbitrarily and capriciously.
The DC Circuit just delivered a huge embarrassment for the SEC.
But the ETF isn't approved yet 🧵
— Jake Chervinsky (@jchervinsky)
Aug 29, 2023
1/ Massive win yesterday. Let’s dig into why the DC Circuit Court (!!!) ruled in favor of @Grayscale and against the @SECGov.
To sum it up - the Court found that the SEC failed to coherently explain why it treated like products unlike. 🧵
— Marisa Tashman Coppel (@MTCoppel)
Aug 30, 2023
BTC ETF Investment Musings
Let’s just go ahead and say that this ETF does get approved.
If so, what would actually happen?
A bump in prices: There’s no denying that a spot bitcoin ETF approval is extremely bullish for bitcoin prices in general. A significant amount of capital has been idly waiting for an opportunity like this to invest in bitcoin through a more conventional investment channel.
While we can’t guarantee higher BTC prices on the heels of an approval, we can look at the history of SPDR Gold Trust (GLD) – the largest physically backed gold ETF – to give us an idea...
GLD was launched back in 2004, just prior to the 2008 recession. Ever since, the price of the hard asset hasn’t looked back:
The introduction of GLD made it significantly easier for individual investors, financial advisors, and institutional investors to invest in gold, leading to increased demand for the asset. We’re cautiously optimistic that a BTC ETF will have a similar market impact.
A more mature asset: It's important to remember that while the introduction of a spot BTC ETF will make it easier to invest in bitcoin, it won’t be the sole driver of bitcoin prices.
An approval, however, should dramatically decrease price volatility.
A less volatile asset greatly benefits portfolio managers and institutional investors around the world, giving them more confidence that bitcoin can serve as a hedge and/or store-of-value in a portfolio, similar to gold.
That said, one can expect – in the not too distant future with an existing spot BTC ETF – that bitcoin, like gold, could become increasingly reactionary to economic indicators, global crises, inflation rates, etc. (i.e. increasing interest rates will be a headwind… and decreasing rates will be a tailwind).
In other words, if investors and assets managers treat bitcoin as digital gold, it should start trading a lot more like gold and (hopefully) a lot less than a speculative asset that abruptly swings after short squeezes, hacks, stablecoin depegs, Elon tweets, and so forth.
The Only Catalyst That Matters
Let’s review. For the past year and a half, the crypto industry has faced a lack of driving forces for price growth and positive developments.
The main obstacle has come from ongoing scrutiny and regulatory challenges from key figures in D.C. The absence of clear guidelines and the SEC’s ongoing game of whack-a-mole has significantly hindered innovation and dampened enthusiasm in the crypto space.
Think about it: who would want to build in crypto right now with today’s regulatory sh*tstorm?
However, the potential approval of a Bitcoin ETF could be a game-changer. Truly. If regulators approve a spot ETF, then by proxy, they have to be more forgiving on many other crypto initiatives around bitcoin.
So, are we optimistic about this? Without a doubt.
Does the buzz surrounding the potential ETF merit the attention? Absolutely.
However, it's important to note that the possible approval of this ETF isn't the sole factor that should command our attention in the crypto world.
The reality is that the issues with traditional finance – what some might call "funny money" – remain unresolved. The harsh truth is that phony capitalism is still alive and well – arguably the worst it’s ever been.
And in this context, bitcoin doesn't have to achieve anything specific after this ETF approval. It just simply needs to offer a more transparent and unprintable alternative to fiat currency.