In a noteworthy development, the price of Bitcoin surged by 8.5% yesterday, as depicted in the hourly chart below. This upward momentum also positively influenced other cryptocurrencies.
Furthermore, stocks associated with the cryptocurrency industry witnessed even more substantial gains in their session. The Grayscale Bitcoin Trust saw an increase of 16.95%, while Coinbase, a prominent exchange, recorded a surge of 14.91%.
The Grayscale Bitcoin Trust, a subsidiary of Digital Currency Group (DCG), holds the distinction of being the oldest and largest Bitcoin fund traded on Wall Street. Remarkably, Grayscale owns nearly 3% of the total Bitcoin supply and 2.5% of Ethereum.
This impressive progress can be attributed to an American Appeals Court decision, which accepted Grayscale’s application to review the approval of a Bitcoin ETF based on the spot market.
The three judges asserted that the U.S. Securities and Exchange Commission (SEC) failed to provide a satisfactory explanation for rejecting the application. They criticized the Commission’s denial as “arbitrary and capricious,” while also deeming it a violation of federal administrative law.
The SEC’s primary concern was the potential for market manipulation. However, this argument was significantly weakened by the fact that the SEC approved Bitcoin ETFs based on futures contracts, where futures closely track the spot market 99.9% of the time. This was precisely the point emphasized by Grayscale’s legal team. They questioned how manipulation could be a concern when futures closely follow the spot market.
The success of this legal battle is also attributed to the expertise of attorney Donald Verrilli, whose hiring was enthusiastically announced by Grayscale in June 2022. While his compensation remains undisclosed, it can be assumed that his services were well worth the investment.
Last year in June, the SEC rejected Grayscale’s application to convert GBTC into a spot ETF. However, yesterday’s court decision nullified the SEC’s directive. This marks a significant milestone, as for the past decade, the SEC had rejected all 33 applications for Bitcoin ETFs based on the spot market.
Notably, Gemini exchange, founded by Tyler and Cameron Winklevoss, was the first company to attempt obtaining approval in 2013.
Despite this landmark decision, it does not guarantee the eventual approval of a Bitcoin ETF. The SEC retains the option to refer the case to the Supreme Court or utilize alternative arguments.
However, it is likely that the SEC will pivot its anti-ETF policy in a less contentious manner, potentially citing court decisions to justify the change in stance.
Multiple industry giants, including BlackRock and Fidelity, have submitted applications for spot Bitcoin ETFs, reflecting the growing interest in this investment avenue. This decision could not only drive the cryptocurrency’s price higher due to increased demand but also facilitate greater adoption by the general public, allowing investors to gain exposure to Bitcoin without direct ownership.
In conclusion, the court’s decision signals the potential for transformation of the Grayscale Bitcoin Trust into an ETF, resolving the discount issue it has been facing. Moreover, it demonstrates that cryptocurrencies have a future in the U.S., as legal frameworks uphold their significance.
The potential market for spot Bitcoin ETFs could reach approximately $150 billion, with institutional investors expressing interest and holding significant assets under management.
The road ahead seems promising, but the journey towards a fully approved Bitcoin ETF remains complex, with regulatory considerations and market dynamics to navigate.
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