Key Points:
- SEC’s ETF Delay: Bitcoin’s value dips 3% after SEC postpones ETF decision to mid-October.
- Grayscale’s Win: Grayscale’s legal victory earlier boosted the crypto market.
- Regulatory Rollercoaster: Regulatory actions continue to sway cryptocurrency prices.
In New York on Friday afternoon, Bitcoin experienced a 3% decline in value, following the announcement from the Securities and Exchange Commission (SEC) that it would postpone the consideration of applications for exchange-traded funds (ETFs) linked to spot Bitcoin prices until mid-October. This decline effectively nullified the gains seen earlier in the week, driven by Grayscale’s victory in court as they sought to convert a Bitcoin trust into an exchange-traded format.
As of now, the leading cryptocurrency is priced at $25,528, as reported by CoinGecko.
Fred Pye, the CEO of Canadian digital asset investment firm 3iQ, commented, “The SEC’s decision to delay consideration of broader ETF applications once again means that nothing substantial has changed.”
The entire cryptocurrency market also contracted by 3% within a 24-hour period, totaling $1.08 trillion. Ether, the second-largest cryptocurrency by market capitalization, saw a 3.2% decline to reach $1,611.
Conor Ryder, head of research at Portugal-based stablecoin issuer Ethena Labs, remarked, “It appears that uncertainty about the actual conversion date has emerged, causing the markets to pull back while waiting for more clarity after what might have been an overreaction.”
Earlier in the week, Bitcoin had gained 6%, adding $50 billion to its market cap, following a federal appeals court ruling that deemed the SEC’s denial of Grayscale’s request to transform its Bitcoin trust (traded under GBTC) into an ETF as “arbitrary and capricious.” This price rally raised the total crypto market value to $1.15 trillion.
The Grayscale Bitcoin Trust had been trading at a discount to the net asset value of the cryptocurrency it holds since early 2021. Converting it into an ETF would effectively eliminate most of this discrepancy. According to YCharts, as of Thursday’s close, the discount stood at 20.6%, wider than the 18.1% observed after the court decision earlier in the week but significantly narrower than the nearly 50% discount recorded late last year.
The SEC has historically not permitted ETFs based on spot Bitcoin prices, citing concerns about retail investor risk. Although it does allow funds linked to futures contracts, which offer surveillance protections, these futures prices ultimately depend on the spot market. A three-judge appeals court panel deemed the agency’s stance as irrational.
Pressure has been mounting on the government to approve spot ETFs, especially after several potential providers filed applications in June, leading to a crypto market valuation of nearly $1.3 trillion in July. However, this enthusiasm waned as the SEC showed no signs of taking action on applications from financial giants like BlackRock, VanEck, and Fidelity. The Grayscale decision earlier in the week revitalized the market, but the subsequent SEC timeline announcement tempered the optimism.
Andy Baehr, managing director of CoinDesk Indices, stated, “Regulatory activity has been the primary driver of Bitcoin prices this summer, given low trading volumes and subdued markets. Right now, regulatory news is driving the narrative.”
Bitwise Investments, a digital asset manager, decided to withdraw its proposal for a Bitcoin and Ether ETF without providing a specific reason.
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