Bitcoin (BTC) and other cryptocurrency prices jumped this week after a U.S. appeals court ruled that the country’s Securities and Exchange Commission acted arbitrarily in rejecting Grayscale’s ETF approval application.
The decision sparked a significant rally in the crypto market, as many investors now expect positive decisions in other bitcoin ETFs that would draw more investment in the largest cryptocurrency. It also opens the door for the launch of exchange-traded funds for other cryptocurrencies. The total market capitalization of the crypto market rose to over $1.09 trillion.
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Rulings on Bitcoin ETFs to come
The court ruling in the Grayscale litigation is important because the Securities and Exchange Commission (SEC) is currently reviewing other applications for spot bitcoin ETFs. These come from major investment firms such as Invesco, Blackrock, and WisdomTree.
Deadlines for these applications are already set for the next few days, though the agency still has options to delay them. As we last reported, the SEC could decide to approve, deny or delay the ETF applications.
I believe the agency will need more time to review these applications and the court decision on Grayscale. Ultimately, however, I suspect it will be forced to approve bitcoin ETFs.
For one thing, the latest applications offer some improvements over the original ones. For example, they include a monitoring clause that helps prevent manipulation in the ETF market. Also, there are already gold ETFs like the SPDR Gold Trust, and I don’t see much difference between BTC and gold.
Are there more crypto ETFs coming?
Another important aspect to consider is that companies may try to bring more crypto ETFs to the market if a Bitcoin fund is listed. The most obvious candidates for these funds are cryptocurrencies like Bitcoin Cash, Bitcoin SV, and Litecoin.
These three altcoins are very similar to Bitcoin, as they all originated as its spin-offs. Unlike most other cryptocurrencies, the blockchains of BCH, BSV, and Litecoin are based on the proof-of-work (PoW) principle without an option for staking. Therefore, the SEC does not consider them to be securities.
The only challenge with some of these cryptocurrencies, particularly Bitcoin SV and Bitcoin Cash, is that they tend to have low daily trading volumes. As a result, crypto ETFs could prove unprofitable for investment firms.
An Ethereum ETF could also be launched. It is both the second-largest cryptocurrency by market cap and the blockchain network with the highest deposits, powering such sectors as DeFi and NFTs.
The problem for Ethereum is that the network has moved from proof-of-work to proof-of-stake (PoS) after the merge. The combination with the beacon chain introduced staking. As a result, the SEC likely sees it as a financial asset, which could make it difficult to approve for an ETF. Other cryptocurrencies with potential for ETFs include Tron, Cardano, and Polygon.
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