JP Morgan analysts, spearheaded by Nikolaos Panigirtzoglou, have forecasted that the US Securities and Exchange Commission (SEC) will likely be forced to greenlight several spot Bitcoin Exchange-Traded Funds (ETFs). This prediction comes on the heels of Grayscale’s significant legal triumph against the SEC.
Last week, a federal court mandated the SEC to revisit its prior rejection of Grayscale’s bid to convert its BTC Trust (GBTC) into an spot ETF. The court’s decision was rooted in the SEC’s “arbitrary and capricious” stance, where it failed to elucidate its differential treatment of futures-based ETFs and spot-based Bitcoin ETFs. The court emphasized that the SEC’s rejection lacked a solid foundation, especially given the close correlation between the spot market and the CME futures market.
JP Morgan Predicts Spot Bitcoin ETF Approval
Nikolaos Panigirtzoglou remarked in a note, “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 further 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 SEC’s recent announcement to delay decisions on spot ETFs from financial behemoths like BlackRock, Fidelity, and Invesco until mid-October has further fueled speculations. JP Morgan analysts interpret this postponement as a strategic move by the SEC to potentially approve multiple spot Bitcoin ETF applications simultaneously.
This approach would not only eliminate any first-mover advantage but also foster competition, which could lead to a reduction in ETF fees. Panigirtzoglou stated, “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.”
However, it’s not all sunshine and rainbows. While the potential approval of spot ETFs in the US is a significant milestone, JP Morgan analysts have also sounded a note of caution. They highlighted that spot BTC spot ETFs have been operational in regions like Canada and Europe for a while but haven’t witnessed substantial investor traction. The analysts further noted, “Outflows from gold ETFs over the past year haven’t significantly benefited Bitcoin funds, including futures ETFs.”
A few days ago, Panigirtzoglou also predicted that the current sell-off may be nearing its end, as open interest in CME BTC futures contracts has declined. He foresees the crypto market bottoming out in the coming weeks and a rebound in the second half of the year.
At press time, BTC traded at $25,974.
Featured image from Pymnts.com, chart from TradingView.com