It has been a long battle between the U.S security and exchange commission (SEC) and the crypto industry, especially with the approval of a Bitcoin ETF. J.P Morgan believes the agency may be forced to approve an ETF soon though.
The SEC denied Grayscale’s application to convert its Bitcoin Trust into a spot Bitcoin ETF last week. The application which was first made in 2021 was denied and an appeal was filed by Grayscale, which culminated in a ruling in support of the Bitcoin investment platform.
In a ruling last Thursday, the presiding judge, Neomi Rao of the Washington D.C. The Circuit Court of Appeal had said “Denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.”
The judge was referring to the approval of a futures Bitcoin ETF in the past but denying Grayscale’s application under similar conditions. According to a note by J.P Morgan analysts led by Nikolaos Panigirtzoglou on Friday, the commission will have to withdraw its past approval to justify denying Grayscale’s application.
The analysts further said the move will be “very disruptive and embarrassing for the SEC” and is unlikely to be the choice action by the agency. In their opinion, “it looks more likely that the SEC would be forced to approve the spot bitcoin ETF applications that are still pending from several asset managers, including that from Grayscale.”
A Better Outcome Expected
There have been several spot Bitcoin ETF applications filed over the years. The SEC has however always delayed and eventually denied every one of such applications. As expected by many in the crypto space, the commission once again delayed decision on some applications filed this year.
Rather than being pessimistic, J.P Morgan analysts believe that the delay could turn out to have a positive outcome where multiple applications could be approved. The postponement “likely points to approval of multiple spot bitcoin ETF applications at once rather than granting a first-mover advantage to any single applicant,” the JPMorgan analysts said.
Indeed, multiple approvals could bring many positive things to the industry, especially in terms of fees.
“That could be beneficial for investors as it would allow for more competition in terms of ETF fees. Grayscale will likely face even bigger pressure to lower fees if its trust gets approval to be converted to the largest bitcoin spot ETF in the world,” the analysts added.
ETF Approval Not a Big Deal
A spot Bitcoin ETF approval has long been looked forward to by the crypto industry. It is believed that even a single approval could turn the fortunes of the crypto industry by attracting more institutional investors.
Many crypto analysts have made predictions of what the price of the asset could rise to with an ETF approval, one of which is that of Fundstrat co-founder Tom Lee. Lee in his prediction said a spot ETF approval could cause Bitcoin’s price to skyrocket up to $180,000.
J.P Morgan analysts however believe that Bitcoin ETFs will not substantially affect the price of Bitcoin. They cited examples of spot Bitcoin ETFs in Canada and Europe that have not attracted many investors. Lee however says only an ETF approval in the U.S could significantly affect Bitcoin’s price.