US regulators are poised to issue a landmark ruling on an exchange-traded fund (ETF), the first of its kind, to bitcoin, which could open up the crypto market to billions of dollars in new entries.
The Securities and Exchange Commission (SEC) has until November 14 to approve or reject the VanEck Bitcoin ETF, which has been under review for more than seven months.
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Investors have described the physically backed bitcoin ETF, or spot, as a "seminal event" for BTC and the broader cryptocurrency market, with some expecting the current market rally to pick up and send bitcoins above $ 100,000 before the end of 2021.
Bitcoin has already risen more than 300 percent over the past year, hitting a new all-time high on Wednesday above $ 68,000, but it has swung wildly in price in recent months.
Market volatility has been largely driven by major news within the crypto space, with Tesla's announcement to accept BTC as a form of payment earlier this year fueling the initial rally, before the reversal of this combined decision. with China's crackdown on cryptocurrencies it will cause a great collapse. .
The latest price gains were driven by El Salvador's announcement that it would introduce bitcoin as a legal form of bidding, making it the first country in the world to do so, as well as rumors. and eventually approval, from the first bitcoin futures ETF.
The approval of a spot bitcoin ETF would be even more important news for the market than a bitcoin futures ETF, as the fund maintains custody of the cryptocurrency and gives investors direct exposure to bitcoin, while also providing the safety and regulatory protection traditional investors are used to. .
"Futures-based ETFs are more expensive and less efficient than spot-based ones," explained Vetle Lunde, an analyst at Arcane Research, in a blog. mail last month. “This is the result of its complicated structure that requires more maintenance.
“ETFs could be very bullish on bitcoin. They will allow more institutional investors to invest in bitcoin through an easily accessible investment vehicle ... [But] this could be a dangerous period with high volatility. If the first final verdicts are negative, I would not be surprised to see turmoil in the futures market and new rounds of liquidations. A positive verdict, on the other hand, could lead to the opposite scenario. "
Not everyone is hoping it will get the nod, with Eric Balchunas, a senior ETF analyst at Bloomberg, estimating the possibility of the SEC approving the ETF as "roughly the same chance that the Eagles will win the Superbowl." . He tweeted earlier this week: "We haven't given any formal odds, but I'd say the odds are like 200-1."
Some analysts warn that a rejection could trigger a reversal of market momentum into a potentially deep bear market, as has happened after previous bull runs in 2013 and 2017, however others suggest days of bitcoin's 70 percent pullbacks have been left behind because of this. annual inflow of institutional capital and increased adoption.
"While this recent price rally can be attributed to movements such as the approval of the first bitcoin ETF for institutional investors, we cannot ignore the impact of significant development and adoption in emerging markets," Ray Youssef, Co-Founder and CEO of Paxful . , a peer-to-peer fintech platform, said The independent.
"For example, more developers are entering the space, the Lightning Network is seeing a massive rally supported by Twitter's Jack Dorsey, and countries like El Salvador have adopted bitcoin as legal tender."
If the SEC rejects the VanEck bitcoin ETF, more are currently being considered. Earlier this week, cryptocurrency lender BlockFi and investment management firm Neuberger Berman joined forces to file a spot bitcoin ETF with US regulators.
A research note published by crypto platform Luno this week attributed bitcoin's latest all-time high to "traders looking to preview" the SEC's response, and additional filings add to the positivity.
"Optimism is growing in the market," he said. "A rejection of VanEck does not necessarily imply that these other submissions will receive the same verdict."
