Why did the SEC reject the approval of a bitcoin ETF for spot trading? Will BlackRock’s attempt be successful this time?

Why did the SEC reject a bitcoin ETF for spot trading? Will BlackRock succeed where others didn't?

Asset management giant BlackRock will submit an application for a Bitcoin ETF (Exchange-Traded Fund) and use Coinbase (COIN) Custody for pricing. Cryptocurrency researcher Thiccy analyzed the reasons for the SEC’s opposition to a Bitcoin spot ETF and their views on BlackRock’s application.

SEC has approved several Bitcoin futures ETFs, which hold CME’s near-dated Bitcoin futures contracts, but not spot ETFs. These ETFs are currently trading on the US stock market but have low AUM. The rolling cost of Bitcoin futures ETFs is high, not only due to trading fees + slippage but also because futures trading in the next month tends to be higher than the BTC price in the previous month. This is called “contango.”

SEC has long refused to accept Bitcoin spot ETFs, citing concerns about market manipulation and a lack of supervision sharing agreements between “regulated markets of significant size” and regulated exchanges. This concern is somewhat justified because Coinbase and other US exchanges account for less than 10% of Bitcoin spot trading volume.

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Will BlackRock’s request be approved? It’s uncertain. VanEck has applied three times, and even Fidelity has been rejected. Obviously, if approved, this would be a huge boost for cryptocurrencies. If the Republicans win the 24-year election and dismiss Gensler, this may be a successful opportunity.

Reference: https://twitter.com/thiccythot_/status/1669582449259495424

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