Grayscale's Bitcoin ETF Conversion: SEC's Decision Looms

The D.C. Circuit Court Speaks

As the clock ticks down to the SEC’s deadline for appealing a pivotal court ruling in favor of Grayscale Investments, the agency is facing a conundrum. The decision from the D.C. Circuit Court of Appeals requires the SEC to take a hard look at Grayscale’s bid to morph its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF. The deadline is set for October 13, and let’s be honest, it feels a bit like waiting for your Uber that’s lost somewhere in the next state.

What Are the SEC’s Options?

The SEC can go one of three routes: appeal the decision to the Supreme Court, request a re-examination of the ruling, or stick to its guns and review Grayscale’s conversion application as ordered. Many industry watchers, however, think the agency will happily avoid the appeal route, which is about as appealing as a flat soda.

Analysts Weigh In

We reached out to the crystal balls of financial analysts (a.k.a., Bloomberg ETF experts) who weighed in on the possibilities. Analyst Eric Balchunas mentioned that while an appeal seems far-flung, there’s always a chance for unexpected SEC shenanigans. Fellow analyst James Seyffart even likened the scenario of the SEC denying Grayscale on new grounds to threading a needle while on a rollercoaster. Spoiler alert: it’s hard.

Potential Delay Tactics

The real kicker? These analysts suggest the SEC might find ways to prolong the review process without formally denying the conversion application. Whether it’s sending the application back for review or requiring additional filings, the SEC could delay decisions longer than a teenager deciding what to order at a restaurant.

New grounds for denial
Prolonged review processes
Extended responses to NYSE filings

What’s Next for Spot Bitcoin ETFs?

While Grayscale is experiencing the heat, it’s far from the only player in town. At least seven spot Bitcoin ETF applications are in the SEC’s pipeline, each facing its own basketball-sized hurdles. All these applications, submitted earlier this year, seem to have encountered more bumps than a road trip through a construction zone, with most approval deadlines stretching into 2024.

The Odds of Approval

So, what’s the bottom line? According to Bloomberg analysts, the chances of a spot Bitcoin ETF receiving the green light have surged to 75% for this year, with a whopping 95% probability by the end of 2024! If Grayscale’s application gets the go-ahead, expect a domino effect where upcoming applications might find themselves riding the coattails of this approval like a lucky charm.