Awaiting Approval or Rejection: The SEC's Critical Call on Spot Bitcoin ETFs

As the speculation intensifies around the potential approval of a spot Bitcoin exchange-traded fund (ETF) in the United States, Eric Balchunas, a senior ETF analyst at Bloomberg, has voiced concerns that the Securities and Exchange Commission (SEC) could potentially delay the decision, seeking additional time rather than issuing an outright rejection.

SEC Deliberates As Deadline Approaches

In a recent conversation with Cointelegraph, Balchunas highlighted that although he and James Seyffart, another ETF analyst, envision a 90% chance of approval by January 10, the odds have not increased due to the lingering possibility of postponement. "I would say if we don't see it in the next two weeks, it’s more because they need more time,” Balchunas commented, acknowledging that the slim 10% margin of uncertainty includes both a deferral and a total denial.

The investment community is on edge as the SEC has invested significant effort in scrutinizing Bitcoin ETF issuers’ applications, suggesting that a last-minute rejection would be somewhat shocking. "This would be the rug pull of the decade," Balchunas stated, emphasizing the high stakes involved.

Skepticism and Legal Challenges

Contrasting with Balchunas's perspective, analyst Vetle Lunde from K33 Research projects a mere 5% chance of a spot Bitcoin ETF rejection, signaling a more optimistic market forecast.

Further complications arise from recent public submissions to the SEC, with the latest urging the commission to discard the Bitcoin ETF concept due to concerns over Bitcoin's decentralized nature and its capacity to bypass traditional financial methods—potentially attractive qualities for oppressive regimes seeking to skirt sanctions.

Should an outright denial occur, Balchunas believes that issuers may take a page out of Grayscale's playbook and instigate legal actions against the regulator. He remarked, "People have spent too much money and tried too hard to give up now. So yeah, it would not be over."

Market Speculation and Criticism

Amidst this backdrop of anticipation and cautiousness, vocal Bitcoin critic Peter Schiff has issued a stark warning via social media platform X. Schiff postulates that the approval of a spot Bitcoin ETF could disastrously affect BTC's market price if the expected surge in institutional demand falls short.

The skepticism extends to Matrixport, a data-centric consultancy firm, which predicted that the SEC's nod of approval for a spot Bitcoin ETF is improbable before Q2 2024. Matrixport referenced regular interactions between ETF applicants and SEC staff, but noted an absence of a critical compliance factor that remains unmet, potentially impeding imminent authorization.

As the January 10 deadline looms, industry observers are noting a shift from optimism to caution, mirrored in the declining performance of crypto-related stocks. Despite the odds being in favor of a spot Bitcoin ETF approval earlier in discussions, Balchunas remains aware that there is still a marginal chance for what could be classified as the financial surprise of the decade.