Bitcoin ETF: Setbacks And Timelines

On August 31, the SEC announced it would delay decision-making on six spot Bitcoin ETFs. The move was widely expected, but follows the agency's defeat in its court battle with Grayscale. Judge Rao ruled that the SEC had been "arbitrary and capricious" in denying Grayscale's application to convert GBTC into a spot Bitcoin ETF.

The court defeat does not mean the SEC has to approve an ETF; they may come up with new reasons to deny Grayscale, and all the other applicants. However, it does indicate that the tide is turning. The SEC now knows that public and legal opinion is shifting against it, and further court battles (against extremely wealthy and well-resourced opponents) likely await it if it makes similarly arbitrary decisions in the future.

So, what comes next?

A 2023 Approval?

As a (very) quick recap, a spot BTC ETF matters because it enables a tsunami of institutional and normie money to flow into bitcoin via established brokers and TradFi frameworks.

August's denial by the SEC surprised no one—but it could be the last gasp of a beleaguered agency that known time is no longer on its side. Having prevented spot Bitcoin ETFs from seeing the light of day for over ten years now, it may finally have met its match.

Following the Grayscale victory, two Bloomberg ETF analysts, James Seyffart and Eric Balchunas, increased their odds of a spot Bitcoin ETF approval by the end of this year to 75%, and to near-certainty for 2024.

If it's going to happen in 2023, though, it probably has to be mid-October. Since Bitwise has pulled its application, BlackRock, VanEck, Wisdomtree, Invesco, and Fidelity are next up, on October 17. The next deadline for the SEC after that is mid-January 2024, and the final one in mid-March. (There's also Ark's penultimate deadline on November 11.)

But how realistic is that?

A Potential Timeline

Twitter Crypto has offered some interesting insights. Crypto Rover, for example, points to the different parties currently going through the application process, and what their timings suggest.

There are several widespread assumptions we need to start with:

• A Bitcoin spot ETF will be approved in this round of filings. The SEC is running out of reasons to deny them, and the alternative is almost certainly punishing legal action against the agency.
• BlackRock will probably be approved first. They're a $9 trillion asset manager with enormous global clout. Ark are technically before them but have nowhere near the influence.
• To avoid the appearance of favoring one or other applicant with first-mover advantage, and because the applications are all very similar, it makes sense to approve multiple ETFs at once.

Ark's final deadline is January 10, 2024. It seems unlikely that the SEC would deny Ark, then approve BlackRock a few weeks later. That would be another "arbitrary and capricious" decision, which would probably result in yet more legal action.

If these assumptions are correct, this leaves two possible outcomes:

1. The ETFs are all going to be approved by October 17, the second deadline for BlackRock et al.
2. The SEC will wait until the last minute, and approve all ETFs just before the Ark deadline. This would be the first week of January 2024.

Remember, these conclusions are built on layers of assumptions, partial information, and decisions yet to be made by a regulator that has proved itself to be dysfunctional and vindictive. Additionally, even a few weeks is an eternity in crypto, and things can change in a heartbeat.

Still, there are six weeks to that first date, and four months to the second. One way or another, it's not going to be long before things start to get interesting.

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