Oct 20, 2023

BlackRock recently submitted an amended prospectus for its spot bitcoin ETF application with the SEC. This comes after a false report that the world's largest asset manager received approval from the agency, which sent BTC's price on a short-lived rally.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. All right, Blackrock recently submitted an amended prospectus for its spot Bitcoin ETF application with the SEC. This after a false report that the world's largest asset manager received approval from the agency sent the price of Bitcoin on a short lived rally. Joining us now is vet I head of sector and industry research, Roxanna Islam. Welcome to the show. Roxana. Hi, great to be here. All right, let's talk about these changes in Blackrock's new filing. It includes the acknowledgment of the competition in the race for a spot. Bitcoin ETF. What does that mean? Yeah. So the thing is with these amendments, we've seen several of these come in over the past week or so. I mean, we've seen Black Rock Fidelity and Arc, you know, these are, these are sort of part of the standard uh disclosures that come with ETF launches. So none of it's really that unusual and I'm not going to read too much into the details of what's in the disclosure. Um The fact is that they are making these updates, which means that the SEC is likely an active communication with these issuers. So that's really the big takeaway here. And that's not saying that the SEC is, is really going to guarantee approval because these issuers are making these updates, but it's still a good sign. Um even though it typically is standard with these sort of launches. So, so what kind of update is it? And what does it tell us about how they're communicating with these ETF issuers? Do, do we can we garner any information, any sense of how the, the SEC looks at it such as a, you know, pricing is affected, uh how, how they price these ETF S et cetera to can we can we pick up uh read the tea leaves if you will, whatever it is that tells us or, or coffee, coffee grinds as my grandmother used to do uh with Turkish coffee. But um I, is there anything to do here that we can predict how the uh how, how the SEC is, is looking at this and what their real questions and motivations are? Yeah, I mean, if you look at some of these disclosures, um you know, they, they clearly are um sort of aiming at coming into launch in the next couple of months and, and you can sort of tell, um you know, the way that they're discussing, um you know, the, the clarity behind some of the details behind there. However, it, it really is just some of the standard disclosures um behind the ETF launches. Um I really think that the SEC has been in active communication um with these funds and just going back and forth and making these amendments, um means that approval will likely come before the end of the year if not by early January, by that January 10th deadline, um that ARCA would probably be a significant date um if not approved by the end of this year, You know, the question I asked the previous guest and it's a question I asked the other guests as well. Is this a way for the SEC to use ETF approvals uh as a method by which by which it could potentially regulate the spot markets? Is it, is it trying to gear up if you will uh all these approvals to say we're in charge of these A TFS. This is an unregulated spot market. We should probably be in charge of that. You know, I don't think so. I think, I think that's a little bit of a stretch. I think they've, they've already had a lot of reluctance with approving these spot Bitcoin ETF S and it's sort of just been them being backed into a corner after several months of approving futures, uh Bitcoin ETF S and then futures Ether ETF S and then the, the loss of the gray scale um case. So II, I really don't think there's too much to read into for the broader spot market and the SEC Roxanne, I guess my question is, is if these are standard disclosures, why do you think they weren't included in the application from the get go? Why now are they being included in the amendments after suspected conversations with the SEC? Right. Just, just because the SEC um is probably looking at the applications a little bit more closely now and they're asking for some more clarity behind some of the language and wording in the documents. All right now, Blackrock is not the only application out there, there are seven other applications also in the same race. Do you think we're going to see the same thing that happened with the futures ETF S? We're going to get a bulk approval for all of the applications that are currently pending or do you think that one might come out on top? You know, I think that makes the most sense that they're all approved um at the same time. Um I think there's a little bit of uncertainty on what's going to happen with gray scale and their conversion and whether that will happen along with the other ETF S before or after. So that's sort of the only thing that's uncertain there. But I do think that it makes the most sense for the SEC to approve all of these at once. Kind of like we saw with the Ether Futures ETF S just a couple of weeks ago when they were approved. Uh So when they were approved, the volumes were pretty abysmal. Uh I, I mean, let, let, let's be, let's be honest here, you know, a couple of million dollars in one day, uh, out of, you know, nine ETF S, what would be the benchmark for the spot ETF S should they be approved? What would be a good benchmark to deem them successful? So, I don't know of an exact benchmark, not really something that I've thought of, but, you know, I will point to the launch of the uh Bitcoin Futures ETS a couple of years ago um when Bito was launched in October 2021 you know, that saw, you know, significant turnover, um I believe over a billion dollars in, in, in the first day. So significantly more than we saw with all uh seven of those Ether futures funds. Obviously, we're in a different sort of environment now, right back then, um we were at the peak of crypto, you could say um now that that has sort of died down a little bit. But the thing you have to remember, especially about Ether is, you know, obviously, you guys probably know more than me that, that this is uh a lot less interest in the market for ether than there is in Bitcoin. Bitcoin is definitely um has more of that widespread popularity. Um Investors are also waiting for spot products versus uh more futures products. So, uh you know, I think there's, there's gonna be significantly more excitement behind the launch of, of the spot Bitcoin ETF S than we saw with the uh Ether Futures ETF S which definitely was more lackluster than, than we thought. Now, just to make sure that that's you saying that about Ether, please. Angry Twitter people don't, don't, don't go to go after us. I did not say anything about lackluster lousy Ether. Oh, wait, did I say that? Sorry. Don't throw Roxanne under the bus, Lawrence. All right. I want to talk about the weather. I want to talk about that excitement. Roxanna, there's a lot of big predictions coming up behind the potential uh approval of these applications. One of the most recent came from matrix port that predicts Bitcoin is going to rise as high as $56,000. Should there be an approval? What do you make of these predictions? Do you think the approval of this uh ETF is going to bring that excitement back into the market that we saw in 2021 and 2022? I I think it could um I'm not sure it'll get to the same levels that we saw in 2021 to 2022. But I mean, if you look at the uh the now infamous deleted tweet that was released on Monday about um the ishares products being released, which was later debunked. I think we saw Bitcoin prices go up about 10% or so and you know, some people thought that was a little bit disappointing. Um, if you think about it, that news wasn't really wide as widely disseminated and it was debunked rather quickly. I mean, we saw like a 10% price increase almost immediately. So if these products, if, and when these products are eventually approved, um, you know, we'd likely see a much more significant excitement in Bitcoin prices. Where do you think most of the demand will come from? Uh I think there's, there will be a lot of uh demand for uh retail from retail investors who um want to use Bitcoin in their portfolios and, and maybe they're a little bit still a little bit skeptical of uh of, of investing in Bitcoin directly. And you know, these aren't your typical crypto investors. They're, they're the ones out there that are a little bit more mainstream and uh maybe you're waiting for something a little bit more safer that they can use along with their other uh ETF investments in their brokerage account. All right, Roxanna, we are going to leave it there. Thanks so much for joining us and we hope you have a great weekend. Ok. Thank you guys that was verify, head of sector and industry research. Roxana Islam.

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