JP Morgan analysts have made a bold prediction, suggesting that the US Securities and Exchange Commission (SEC) could soon give the green light to several spot Bitcoin Exchange-Traded Funds (ETFs).
This forecast follows a significant legal victory for Grayscale against the SEC, where a federal court ordered the regulatory body to revisit its rejection of Grayscale’s proposal to convert its BTC Trust (GBTC) into a spot ETF.
The federal court’s decision to mandate the SEC’s review of Grayscale’s ETF bid was rooted in its criticism of the SEC’s “arbitrary and capricious” stance.
The court found fault with the SEC’s failure to clarify its differing treatment of futures-based ETFs and spot-based Bitcoin ETFs.
The court emphasized that the SEC’s rejection lacked a solid foundation, particularly given the close correlation between the spot market and the CME futures market.
Nikolaos Panigirtzoglou, a key figure at JP Morgan, commented on the situation, stating, “The SEC would have to retroactively withdraw its previous approval of futures-based Bitcoin ETFs to defend its denial of Grayscale’s proposal.
Such a move would be very disruptive and embarrassing for the SEC.” He added, “Given the circumstances, it appears more probable that the SEC will approve the pending spot Bitcoin ETF applications from several asset managers, including Grayscale.”
The recent SEC announcement to postpone decisions on spot ETFs from major financial players like BlackRock, Fidelity, and Invesco until mid-October has fueled speculations.
JP Morgan analysts interpret this delay as a strategic move by the SEC, potentially signaling its intention to approve multiple spot Bitcoin ETF applications simultaneously.
This approach not only eliminates any first-mover advantage but also encourages competition, which could result in reduced ETF fees.
Panigirtzoglou noted, “it looks more likely that the SEC would be forced to approve the spot Bitcoin ETF applications that are still pending from several asset managers, including that from Grayscale.”
Despite the potential approval of spot ETFs in the US being a significant development, JP Morgan analysts have sounded a note of caution.
They pointed out that spot BTC ETFs have been operational in regions like Canada and Europe for some time but haven’t seen substantial investor interest.
The analysts also observed, “Outflows from gold ETFs over the past year haven’t significantly benefited Bitcoin funds, including futures ETFs.”
In a separate prediction, Panigirtzoglou suggested that the current crypto market sell-off may be approaching its end, as open interest in CME BTC futures contracts has decreased.
He envisions the crypto market finding stability in the coming weeks, with the potential for a rebound in the second half of the year.
