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Cryptogambling / Bloomberg analyst predicts 5% chance of Bitcoin spot ETF rejection

Bloomberg analyst predicts 5% chance of Bitcoin spot ETF rejection

Publish Date: 08/01/2024
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Bloomberg’s ETF analyst, Eric Balchunas, recently forecasted a five percent likelihood of the U.S. Securities and Exchange Commission (SEC) rejecting the Bitcoin spot exchange-traded fund (ETF).

Balchunas shared his prediction in an X post on Saturday, saying that the SEC would accept the ARK Invest-21Shares ETF bid soon. Balchunas initially estimated a 90 percent chance of approval for ARK and 21Shares’ joint bid. Now, he maintains the likelihood has increased to 95 percent.

“Well said although I probably go with 5% at this point. But you gotta leave a little window open for these things,” said Balchunas.

This prediction depends on unlikely scenarios that could delay or reject the ARK-21Shares Bitcoin spot ETF application. Bloomberg analyst James Seyffart highlighted these situations, including the improbable chance of ARK-21Shares withdrawing their ETF proposal from the SEC.

Per Coingape, BlackRock is optimistic about receiving approval for its spot Bitcoin ETF application as of Wednesday, adding to the positive sentiments the industry has in the expectations of the product.

Earlier, VanEck’s Matthew Sigel hinted at how prepared BlackRock is for the iShares Bitcoin Trust as the firm notably has about $2 billion in wait to inject into the market once the much-anticipated approval is secured.

SEC’s refusal might create problems

Seyffart shared a similar view in response to Balchunas’s post on social media regarding the SEC rejection, saying, “As Eric said. Prolly less than 10% at this point.”

Another possibility is if the SEC discovers other reasons to decline a cryptocurrency spot ETF, which might result in a legal battle between the regulator and ARK-21Shares. Seyffart thinks the SEC would want to steer clear of this situation, especially following its recent legal loss against Grayscale Investments.

He pointed out possible results if the Bitcoin ETF gets rejected next week. The SEC’s refusal might create big problems for younger investors, particularly from Gen Z. This could lead to legal challenges and criticism against the SEC.

“Good question. 1) Ark withdraws with assurances about March (unlikely) 2) Genz goes nuclear & SEC denies using new reasons or ignores the court knowing they’d end up back in court (again–Unlikely) 3) Biden admin comes down and does something to stop this (unlikely),” said Seyffart on X.

Seyffart said if there’s a rejection, the U.S. administration might step in. This intervention could cause more issues for the SEC, making it tougher to stop the Bitcoin ETF’s progress next week.

Balchunas expects applicants to finalize SEC filing

Balchunas anticipates the final steps for the launch of a spot Bitcoin ETF on Wall Street, expecting asset managers to complete their last revisions by today.

The revisions from the applicants must be sent via S-1 filings. These filings should disclose the remaining fees and tickers of the applicants. For instance, asset manager BlackRock has not revealed the fees linked to its ETF yet.

The following step in the process might involve a vote by the SEC commissioners. At the time of writing, nothing is scheduled on the commission’s public agenda before January 11, the expected date for the ETFs’ launch. Balchunas suggests that the SEC might use its delegated authority policy to make the decision.

“We’re not even sure they’re going to vote. […] They could use something called delegated authority, but we don’t know. It looks like there are three options: whether they vote or use delegated authority, which means they must approve it because when they denied the past ones, they didn’t have a vote,” said Balchunas.

Balchunas predicts that most applicants meeting the SEC requirements before December 29 will likely be approved next week. He also emphasized that Grayscale, aiming to convert its Grayscale Bitcoin Trust to a listed BTC ETF, might get its decision after the initial approval of the first applicant.

“It wouldn’t surprise me if there was something different with them,” Balchunas said.

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