January 10, 2024, is rumored to be the approval date of a first-ever Bitcoin ETF in the United States — Investors can't hide their excitement!
So, word on the street is that the SEC will finally approve the first Bitcoin exchange-traded fund (ETF) by January 10, 2024.
Some folks in the know over at FOX Business are talking about it, and it's a pretty big deal. This could be a major turning point for cryptocurrency in the U.S. - we'll have to wait and see!
Coinbase researchers have highlighted that introducing spot Bitcoin ETFs in the U.S. market could result in the scarcity of "regulated" Bitcoin and have implications for a popular trading strategy.
The imminent approval, expected within the next two to three weeks, has raised concerns about potential risks that may emerge once trading begins, according to David Duong, Coinbase's head of institutional research, and Greg Sutton, senior sales trader.
Prominent financial institutions, including industry giants like BlackRock and Fidelity, have submitted applications for spot Bitcoin ETFs, which provide real-time digital asset valuations.
While the SEC has yet to release an official statement, recent indications suggest a positive outcome and the possibility of approving multiple applications simultaneously.
If approved, this decision would give retail investors a cost-effective opportunity to participate in the world's largest cryptocurrency.
Significantly, it would enable them to trade on regulated platforms such as the New York Stock Exchange (NYSE) and Nasdaq, bypassing unregulated exchanges.
During a podcast on December 19, Duong and Sutton raised concerns about the challenges institutions may face in acquiring sufficient Bitcoin to hold in their ETFs due to potential high demand.
They questioned, "What if the demand is so high that these institutions are unable to obtain the required amount of Bitcoin from regulated sources?"
Bitwise, a crypto-focused venture firm, predicts that a spot Bitcoin ETF would experience the most successful launch of any ETF product in history.
Despite recognizing the favorable nature of this development compared to low inflows, Duong highlighted the importance of sourcing risk moving forward.
Sutton also pointed out a second risk factor affecting a commonly favored institutional trading tactic known as the "basis trade."
This strategy capitalizes on the difference between the spot price of Bitcoin and the price of Bitcoin futures contracts.
However, with institutional investors gaining direct exposure to Bitcoin through a spot ETF product, the basis is likely to narrow, diminishing the profitability of this trade.
Furthermore, the SEC has introduced a unique element to the approval process by enforcing a distinct requirement.
The commission insists that ETF applicants use cash, rather than Bitcoin, to acquire shares, thereby eliminating the tax advantage associated with "in-kind" purchases.
This directive has prompted certain applicants, such as Grayscale, to advocate for a hybrid approach involving in-kind and cash creation, aiming to establish a more efficient market structure.
The SEC's preference for cash transactions can be attributed to restrictions placed on broker-dealers, preventing them from directly engaging in spot Bitcoin trading.
Speculation suggests that the commission's concerns regarding the potential misuse of Bitcoin, including activities like money laundering and market manipulation, drive this restrictive measure.