The Securities and Exchange Commission (SEC) may finally approve the long-awaited spot bitcoin exchange-traded fund (ETF) as early as this month, according to Valkyrie’s chief investment officer, Steven McClurg.
Bitcoin’s price has rallied over the past few months in anticipation of a spot ETF approval, doubling in value since the start of 2023.
A spot bitcoin ETF holds the digital currency directly, unlike existing bitcoin futures ETFs which invest in derivatives contracts. Major financial institutions like BlackRock, Fidelity, ARK Invest, and Grayscale have applied to offer spot bitcoin ETFs after years of denial by the SEC over concerns about potential manipulation and adequate pricing sources.
Spot Bitcoin ETF to Fully Launch in February 2024
McClurg predicts the SEC will send another round of comments to applicants within the next few weeks, followed by potential approval of rule changes by month’s end. He argues late November approval could lead to a February fund launch.
“Before anything else happens, we get a second round of comments, and I believe we’ll probably get those comments in the next one to three weeks,” McClurg stated in an interview on Thursday, after Valkyrie amended its own spot bitcoin ETF application.
“A late November approval likely means a February launch,” he added, noting firms still need to submit registration forms after rule changes are authorized.
The SEC is currently reviewing 8-10 spot bitcoin ETF applications. Recent amendments have expanded on risk disclosures, underlying benchmark sources, pricing methodology, custodial arrangements, and other specifics per SEC requests. McClurg believes the years-long debate over market manipulation and custody issues has largely subsided. Other experts caution these factors, particularly potential manipulation, may still pose roadblocks.
Approval Could Unlock Billions in New Investments
McClurg forecasts up to $10 billion could flow into spot bitcoin ETFs within the first 1-2 months post-launch. Bitwise Asset Management CIO Matt Hougan estimates the new funds could attract over $50 billion in cumulative inflows over five years, weighted towards later years.
Bitwise CEO predicts a $50 billion increase in investment in a Bitcoin ETF after its launch, driven by growing demand and reduced supply due to halving.
— Brian Arnold (@havizkolesi) October 27, 2023
While optimism runs high for an imminent SEC approval, Hougan still urged caution until filings are fully approved.
“It feels like we’re in the red zone, to use a football analogy,” Hougan said. “The question is: can we get across the line?”
Major firms have long demanded the SEC for spot bitcoin ETF approval. Yet the agency repeatedly denied past applications over manipulation and pricing concerns.
McClurg contends these issues are largely settled given the years that have passed. For example, the SEC recently settled a manipulation lawsuit against Genesis Global Trading related to the Grayscale Bitcoin Trust. This suggests similar manipulation challenges may be waning.
For now, investors eagerly await the SEC’s next moves. With bitcoin prices rallying and heavyweight investors on board, the demand seems clear. Approval could unleash a flood of new investment into the crypto market.