DTCC pours cold water on the hot speculation, Bitcoin spot ETF still subject to SEC’s decision.

DTCC Squashes Fervent Speculation, Bitcoin Spot ETF Still at SEC's Mercy.

Author: Weilin

Editor: Wen Dao

Bitcoin surged from around $29,000 to $35,280, creating a single-day increase of 21% on October 24, reaching its highest level since June last year, spreading optimism in the market.

The news that caused intense market volatility was that BlackRock subsidiary iShares Bitcoin Trust had been filed with DTCC.

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DTCC is the Depository Trust & Clearing Corporation, responsible for settling Nasdaq trades. Bloomberg ETF analyst Eric Balchunas tweeted that the stock code for iShares Bitcoin Trust will be $IBTC, and this process is a key step in introducing a bitcoin spot ETF to the market.

Since 2020, a large number of major US financial institutions represented by Grayscale, ProShares, and Bitwise have entered the scene and started applying for bitcoin spot ETFs, but the US Securities and Exchange Commission (SEC) has had a baffling attitude towards this “exchange-traded open-end index fund.” In the past decade, no institution has been approved through the application process.

The filing of iShares Bitcoin Trust with DTCC has rekindled hope, and cryptocurrency investors are also looking forward to the approval of a bitcoin spot ETF to turn the market bullish.

On October 25, DTCC seemed to cast a cold water, with its spokesperson stating that appearing on the list only indicates that the custodian bank has requested the ETF fund to provide a DTCC identifier, and being on the list does not indicate that a specific ETF fund has obtained regulatory approval.

The highly anticipated bitcoin spot ETF is back to waiting for the SEC’s decision.

DTCC Clarifies: Filing does not mean approval

After BlackRock subsidiary iShares Bitcoin Trust appeared on the DTCC filing, a spokesperson for Bloomberg said to the media that adding securities to its “qualification files” and preparing for the issuance of new potential ETFs is DTCC’s “standard practice.” The names in the file are maintained by DTCC subsidiary National Securities Clearing Corporation (NSCC) and include active and potential ETF securities.

iShares Bitcoin Trust has been filed with DTCC

When the market saw “trust filing” as a sign of “bitcoin spot ETF launch,” a DTCC spokesperson stated in an email, “Appearing on the list only indicates that the custodian bank has requested the ETF fund to provide a DTCC identifier,” and DTCC can only process the transaction after receiving approval from the SEC, and the timing is uncertain. DTCC also added that being listed as a proposed fund on the list “does not indicate the outcome of the regulatory approval process for a specific ETF fund.”

Despite the cold water from DTCC, investors seem undeterred. As of the morning of October 26, Bitcoin is still above $34,000, demonstrating the market’s optimistic sentiment towards a bitcoin spot ETF.

The impatient anticipation had already appeared in a bizarre fake news story earlier this month.

On the evening of October 16th, well-known cryptocurrency media outlet Cointelegraph reported that the SEC had approved the listing application for the Blackrock Bitcoin Spot ETF. The impact of this news caused the price of Bitcoin to rise from under $28,000 to $30,000 on the same day, with a maximum intraday increase of over 10%.

However, the price of Bitcoin quickly fell back to around $28,000 as Cointelegraph apologized and acknowledged that their news contained inaccurate information about the Blackrock Bitcoin ETF. They announced an internal investigation.

Nevertheless, after the incident, Larry Fink, the CEO of Blackrock, commented on the price increase caused by this controversial incident. He said on the Fox Business program, “This is an example of pent-up demand in the cryptocurrency market. We have heard demand for cryptocurrencies from our clients around the world.”

Just this month, the U.S. District Court of Appeals for the District of Columbia criticized the SEC’s decision to reject Grayscale’s application for a spot ETF. Interestingly, the SEC did not appeal this, which the market interpreted as “increasing the possibility of Grayscale obtaining ETF approval.”

The deadline for approval of multiple Bitcoin spot ETFs is March 2024

According to the SEC’s guidance rule, the SEC has the authority to delay ETF applications for up to 240 days. Currently, the approval deadlines for many applications are set for March 2024.

Even so, the SEC has never approved any Bitcoin spot ETF proposals from U.S. companies up to now, except for accepting the application for ProShares Bitcoin Futures ETF, which is related to Bitcoin futures investments, in October 2021.

Why is the Bitcoin spot ETF highly anticipated?

The English full name of ETF is Exchange Traded Fund, translated into Chinese as “交易型开放式指数基金” (trading-type open-end index fund). A Bitcoin spot ETF is a fund established based on a Bitcoin price index in a certain market.

Countries such as Canada and Brazil have already approved the launch of Bitcoin spot ETFs. As an important part of the global financial market, the United States has received numerous Bitcoin ETF applications from various institutions, with a total of $17.7 trillion in assets under management.

The approval of a Bitcoin ETF is not unprecedented, but rather the approval of Bitcoin futures ETFs. On the morning of October 19, 2021, ProShares Bitcoin Futures ETF was officially listed on the NYSE Arca market under the ticker symbol BITO. It had been 8 years since it submitted the application.

In the eyes of regulatory agencies, regulated Bitcoin futures ETFs are significantly safer than spot ETFs. With futures contracts, Bitcoin futures ETFs allow users to agree to buy or sell Bitcoin at a specific price on a specific date, without needing direct investment in the Bitcoin market.

In the eyes of supporters, the approval of a Bitcoin futures ETF would bring many benefits.

Firstly, the SEC would increase the mainstream credibility of Bitcoin and related assets, increasing their regulatory legitimacy as investable assets. Secondly, allowing investors to gain exposure to cryptocurrencies through purchasing shares, without the need for a digital wallet or trading account, would make market entry easier and attract a large number of traditional investors. Other reasons include the possibility that large institutional investors trading in the ETF could help alleviate excessive volatility and manipulation in the cryptocurrency market, and help mature the cryptocurrency market, among other things.

However, none of this has made the SEC view Bitcoin futures ETFs differently, and the road to approval for various financial institutions has been tough.

In July 2013, the Winklevoss brothers, co-founders of Gemini, were the first adventurers to apply for the Winklevoss Bitcoin Trust, but it was ultimately rejected by the SEC. At that time, Bitcoin was still niche and not on the regulatory radar.

As the cryptocurrency market gradually grew to the trillion-dollar level, a large number of American companies began attempting to apply for Bitcoin futures ETFs.

Starting from October 2020, Grayscale planned to convert its BTC Trust into a futures ETF, but during the three-year application process, it faced various rejections from the SEC. One year ago, Grayscale decided to officially sue the SEC, beginning a legal battle that has lasted over a year.

Since 2023, news about “Bitcoin futures ETFs” has prompted several rebounds in Bitcoin, including the move made by BlackRock and Fidelity Investments to reapply for a futures Bitcoin ETF in June of this year, when the Bitcoin trading price briefly surpassed $30,000.

Since 2022, the crypto asset market has been struggling after experiencing events such as the collapse of LUNA, the bankruptcy of Three Arrows Capital, and the FTX scandal, causing the price of Bitcoin, the highest market value cryptocurrency, to drop below $16,000 at one point.

Against this backdrop, investors in crypto assets are hoping that a Bitcoin futures ETF will bring in large-scale incremental funds and attract widespread participation from traditional investors.

According to data analysis company CryptoQuant’s predictions, once the United States approves a futures Bitcoin ETF, the entire cryptocurrency market will grow by $1 trillion, with issuers injecting roughly $155 billion into the Bitcoin market, which accounts for almost one-third of Bitcoin’s current market value.

With Bitcoin surpassing the $34,000 to $35,000 threshold, market sentiment has once again turned optimistic. Bloomberg ETF analyst Eric Balchunas said, “Either BlackRock has received the green light, or they are simply predicting and preparing for everything. We still believe that multiple ETFs will be launched together, rather than BlackRock being the only one approved first.”

However, whether it’s one or multiple ETFs, the final decision-making power still lies with the SEC. Cautious analysts remind us that in the progress news of Bitcoin futures ETFs, the market will still experience fluctuations, and investors need to be vigilant of risks.

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