Bitcoin market braces for Wednesday 6 July

Last Updated: 29 June 2022

The next two weeks will be exciting for the bitcoin market. Many investors have circled July 1 and 6 in red (or green) on their calendars. On those two days, the US financial watchdog (SEC) will decide whether bitcoin based ETFs can come to market.

In this article, we look at Grayscale’s application, whose deadline for the SEC to approve or reject expires on 6 July. If approved, Grayscale will convert its own GBTC into a spot bitcoin ETF. They are assuming a good outcome as they are already getting help from Wall Street firms, Jane Street and Virtu, to legally convert their fund into an ETF. Still, Grayscale says it is preparing for “all possible scenarios.

Converting bitcoin fund Grayscale

Currently, Grayscale offers several funds for different cryptocurrencies. The most important one is the Grayscale Bitcoin Trust (GBTC), and by the grace of the SEC, it is thus being converted into an ETF. This is exceptional, as most of the applications that come to the SEC for a bitcoin ETF do not yet have a comparable product ready.

Grayscale has already proven its ability to manage a popular bitcoin product for institutional investors, so with that, they hopefully have an advantage. CEO Michael Sonnenshein’s attitude is not in question. He says the company is “unequivocally committed” to the conversion.

Of great importance on bitcoin price

The Securities and Exchange Commission has repeatedly postponed a decision on GBTC’s conversion. Therefore, the stakes are high because, if approved, this will become the first available spot-based bitcoin ETF in the US. This means that for every share in this ETF, Grayscale will have to buy real bitcoins on the regular market.

The US is the largest financial market in the world, so this could have a massive impact on the bitcoin price. This is because it makes it easier for institutional investors to invest in bitcoin without having to manage bitcoin for their own clients.

This ETF is different from others

The SEC has rejected similar proposals from other financial institutions in the past, mostly due to concerns over market manipulation and a lack of agreements to share oversight of the underlying market. Those that have been approved are drastically different from Grayscale’s proposal. These already approved ETFs are based on future contracts on bitcoin and not on the underlying spot market.

Grayscale bolstered their application by arguing in a letter to the SEC that the difference in treatment between spot and futures products could constitute a violation of the Administrative Procedures Act.

All possible scenarios

Yesterday, CEO Sonnenshein sent a letter to investors saying that although the company is encouraged by the SEC’s actions over the past eight months, it is preparing for “all possible scenarios after the ruling.”

“Most importantly, GBTC is operationally ready to convert to an ETF the moment we get the appropriate regulatory approvals,” the letter said.

Grayscale has announced a deal with Wall Street firms Jane Street and Virtu Financial to help convert GBTC into an ETF. The deal will not take effect until the product is approved.

Should the approval fail, Grayscale is exploring options, such as suing the SEC.

“We have created the strongest possible legal team to help us put the importance of this issue into words,” says Grayscale.

  • Florian Feidenfelder

    Florian Feidenfelder is a seasoned cryptocurrency trader and technical analyst with over 10 years of hands-on experience analyzing and investing in digital asset markets. After obtaining his bachelor's degree in Finance from the London School of Economics, he worked for major investment banks like JP Morgan, helping build trading systems and risk models for blockchain assets.

    Florian later founded Crypto Insights, a leading research firm providing actionable intelligence on crypto investments to hedge funds and family offices worldwide. He is the author of the bestseller "Mastering Bitcoin Trading" and has been featured in prominent publications like the Wall Street Journal, Bloomberg, and Barron's for his insights on blockchain technologies.

    With extensive knowledge spanning the early days of Bitcoin to today's explosive DeFi landscape, Florian lends his real-world expertise to guide both new entrants and seasoned professionals in capitalizing on the wealth-creating potential of crypto trading while effectively managing its inherent volatility risks.

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