According to reports from Bloomberg Intelligence, Grayscale’s Bitcoin ETF has experienced significant withdrawals, amounting to approximately $579 million.
The magnitude of this withdrawal is notable in the context of the broader market for Bitcoin ETFs. Contrastingly, other spot Bitcoin ETFs have attracted nearly $819 million in investments.
This stark divergence in investor behavior underscores a critical assessment of the Grayscale Bitcoin ETF’s performance post-SEC approval. Initial enthusiasm, marked by a trading volume of over $2.3 billion on the ETF’s inaugural day, has cooled, with these outflows suggesting a shift in investor sentiment.
The withdrawal trend from the Grayscale ETF aligns with previous projections by analysts, which anticipated over $1 billion being pulled from the fund in the ensuing weeks.
A contributing factor to this outflow could be the fund’s relatively high expense ratio, which is 1.5% — the highest among U.S. Bitcoin ETFs. In comparison, other spot ETFs, including BlackRock’s IBIT and Fidelity’s FBTC, have seen substantial inflows of $500 million and $421 million within initial trading periods.
SEC’s historic approval of Bitcoin ETFs last week brought a lot of positivity and optimism into the industry. However, it has also sparked several controversies and concerns. Experts have cautioned against the potential risks of Coinbase’s dominance as the custodian of most ETFs.
The immediate supply shock after the SEC’s approval has also triggered significant volatility in Bitcoin’s value, as the leading cryptocurrency constantly fluctuates between $41,000 and $44,000.
All told, there were 700,000 individual trades today in and out of the 11 recently approved spot Bitcoin ETFs, reported industry analyst Eric Balchunas on Jan. 12.
This shows that there was substantial demand for the products on the first day, as total volumes were more than $4.3 billion, according to the figures.
He added that the non-spot ProShares Bitcoin Strategy ETF (BITO) and Grayscale (GBTC) were both in the top ten among overall ETFs in trading volume.
All told there were 700,000 individual trades today in and out of the 11 spot ETFs. For context, that is double the number of trades for $QQQ (altho it sees much bigger $ volume bc bigger fish use it) So a lot more grassroots action (vs big seed buys) than I expected which is… pic.twitter.com/syUGfjHQpr
Grayscale’s Bitcoin Trust had just over $2 billion in volume on the first day of trading as a spot ETF after it was permitted to convert the fund. GBTC volume was almost equal to all of the other Bitcoin ETPs combined as it already had a big AUM (assets under management) head start.
On Jan. 12, fellow ETF analyst James Seyffart posted a similar table of trading volumes for day one.
His calculated total trading volume for the 11 newly launched funds was $4.6 billion. BlackRock and Fidelity were second and third after Grayscale, with volumes of $1 billion and $700K, respectively.
He added that a lot of the volume may have been investors moving out of GBTC into the new ETFs due to more favorable fee structures or moving from futures-based funds (ProShares) to spot funds.
“Very easy argument to be made that a ton of this volume was selling of GBTC and buying of other ETFs for now!”
Industry author Vijay Boyapati made a similar conclusion, stating that there are also massive outflows “as many investors rotate out of more costly ways of getting Bitcoin exposure that were available pre-ETF” before adding:
“Long term, the net flows will be very large and positive.”
Here’s the #Bitcoin ETF Cointucky Derby data via trading volume on day 1 (more volume will continue for a little while).
Total Volume was over $4.6 Billion with $GBTC about half of it. BlackRock & Fidelity went 1 & 2 absent GBTC. pic.twitter.com/t70MzyQfZW
There has been no discernable reaction in spot Bitcoin markets, with the asset spiking to $49,000 on ETF launch day but retreating to around $46,000 at the time of writing.
Moreover, total market capitalization remains flat on the day at $1.85 trillion.
Altcoins appear to be taking a breather after their big pumps this week, but analysts have cautioned over a post-ETF market correction as the hype fades for now.
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Grayscale has submitted a modified S-3 filing for the conversion of its GBTC into a spot Bitcoin ETF on the same day of its surprising leadership shuffle.
The asset manager reportedly reached a compromise by agreeing to adhere to the US Securities and Exchange Commission’s (SEC) stipulation for cash-only creation and redemption.
Grayscale’s Compromise Stirs Debates
Grayscale has made multiple revisions to its 2018 filing. In November, two alterations were suggested. The initial one changed the fee collection method from a monthly to a daily structure. The second adjustment involved the modification of how assets are combined in an omnibus account, aiming to streamline the creation and redemption of shares.
According to Bloomberg’s James Seyffart, Grayscale seems to be acquiescing to the SEC’s requirement for cash-only orders in its recently amended S-3 filing. Seyffart believes the asset manager is “bending the knee” to comply with the SEC’s directive.
The ongoing dispute between asset managers seeking to launch a spot Bitcoin ETF and the SEC revolves around the contrasting approaches of cash and in-kind creations. While the majority of stock and commodity-based ETFs operate on an in-kind model, enabling direct handling of the fund’s assets by market participants, a cash-creation model restricts the creation or redemption of new shares in a spot Bitcoin ETF to cash transactions alone.
The SEC’s decision to prohibit broker-dealers from directly engaging with Bitcoin is perceived as an effort to enhance tracking of BTC movements from exchanges and to mitigate potential risks related to anti-money laundering or Know Your Customer compliance.
Finance Lawyer Scott Johnson highlighted the issue of in-kind creation/redemption in the context of the SEC’s rulemaking for digital asset safekeeping and said the amended S-3 sheds light on the challenge posed by the regulator’s reluctance to approve amendments allowing in-kind processes despite assertions from broker-dealers and exchanges that compliance is feasible.
This regulatory stance, seemingly aimed at investor protection, paradoxically results in reduced safeguards as Grayscale seeks approval for a novel cash-based approach in contrast to the industry norm of in-kind models for spot commodity ETFs, introducing a new layer of uncertainty for investors, according to Johnson. He further added,
“Gary has twisted the SEC’s crypto regime into a knot where it simultaneously allows and disallows its existence via some Rube Goldberg-ian mess, and courts are forced to intervene every so often to reconcile the stupidity. But rest assured, no guidance needed. All very clear.”
Barry Silbert’s Resignation
On the other hand, Barry Silbert’s exit may considerably favorably impact the odds of Grayscale’s successful transformation of the GBTC into a spot Bitcoin ETF.
Adam Cochran, a partner at Cinneamhain Ventures, suggests that Silbert’s decision to resign was undoubtedly an agreement between the asset manager and the SEC, strategically coordinated before the approval of the conversion request.
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In a surprising turn of events, Barry Silbert, the founder and CEO of Digital Currency Group (DCG) – the parent company of Grayscale – has resigned from the asset manager’s board of directors.
Silbert, a key figure in the cryptocurrency industry, has played a crucial role in shaping the growth of Grayscale Investments. His departure from the board signals a significant shift in leadership and strategy for the firm.
The official 8-K filing with the US Securities and Exchange Commission (SEC) on December 26 confirmed the resignation.
Besides Silbert, Mark Murphy, the president of Digital Currency Group (DCG), has also announced his resignation from the Grayscale board.
Both the former execs’ resignations will take effect on January 1, 2024. Mark Shifke, 64, the chief financial officer of DCG, will be taking over Silbert’s role.
The newly appointed members joining Grayscale’s board include Matt Kummell, 47, the Senior Vice President of Operations at DCG, and Edward McGee, 40, who holds the position of Chief Financial Officer at Grayscale, as outlined in the submitted document.
As a result of these changes, Grayscale’s board composition now includes Shifke, Kummell, McGee, and Michael Sonnenshein, the CEO of the company. The filing did not provide specific details regarding the reasons behind these alterations.
The change in leadership at Grayscale comes at a time when the asset manager is seeking approval from the SEC to convert its GBTC into a spot Bitcoin ETF.
Grayscale Investments’ CEO, Michael Sonnenshein, recently expressed optimism regarding the ongoing discussions with the securities watchdog about the potential approval of a spot Bitcoin ETF. He further added that if greenlighted, this could pave the way for an influx of $30 trillion in wealth into the crypto market.
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Michael Sonnenshein, the CEO of leading asset management firm Grayscale Investments, believes the approval of spot Bitcoin exchange-traded funds (ETFs) could allow the crypto market to enjoy an inflow of $30 trillion in advised wealth.
During an interview with CNBC’s Squawk Box, Sonnenshein said there is a lot of market optimism for Bitcoin (BTC) next year as many investors are adding the digital asset to their portfolios.
Opportunity for $30T Advised Wealth Inflow
Sonnenshein said the optimism in the market could be traced to Grayscale’s court victory a few months back, which bolstered the community’s hope for a spot Bitcoin ETF approval. Recall that in August, a U.S. Court ordered the Securities and Exchange Commission (SEC) to reevaluate the asset manager’s application to convert its leading GBTC fund into a Bitcoin ETF.
The Grayscale CEO opined that the launch of spot Bitcoin ETFs would unlock digital asset exposure to a part of the investment community that has been locked out of the opportunity to have exposure to BTC. He said the U.S. advised market worth $30 trillion would become part of the investment community with BTC exposure after the launch of the products.
“So, we’re really talking about the advised market here in the U.S., which is today about $30 trillion worth of advised wealth that we hope the approval of spot Bitcoin ETFs, the uplisting of the GBTC will allow for that opportunity and for those investors to partake in it as well,” he stated.
Grayscale is among more than a dozen traditional finance firms that are contending to launch the first spot Bitcoin ETF in the U.S. Some of the asset managers in the race include BlackRock, Ark Invest, Fidelity, Galaxy Digital, Franklin Templeton, and VanEck.
Biggest Development on Wall Street in 30 Years
Sonnenshein’s comments on the anticipated ETF approval come on the heels of a similarly huge remark by Michael Saylor, co-founder and executive chairman of business intelligence firm MicroStrategy.
In a recent interview with Bloomberg, the Bitcoin advocate said the approval of a spot Bitcoin ETF could be the biggest development on Wall Street in the last 30 years.
Meanwhile, the SEC is expected to approve all or some spot Bitcoin ETF applications by January 2024.
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Grayscale meets with the SEC again to discuss its spot Bitcoin ETF application, and Hashdex becomes the second firm to post a crypto ETF ad.
According to reports, Grayscale met with the SEC on Tuesday to discuss potential rule changes to their ETF application. The leaked memorandum shared by Bloomberg reporter James Seyffart shows that Grayscale is still pushing for in-kind and cash transactions for their spot Bitcoin ETF.
In-kind transactions refer to the process where ETF shares are created or redeemed by exchanging securities, like stocks or bonds, instead of cash. This method efficiently manages the ETF’s portfolio and helps minimize the tax impact on investors.
Grayscale also proposed that only authorized participants should be able to create and redeem Bitcoin ETP shares and must be registered with FINRA.
Bitcoin ETF advertisement war is heating up
The excitement around ETFs continues to build up, with Hashdex posting an ad promoting their upcoming crypto-ETFs today. Hashdex becomes the second firm to release such an ad, as Bitwise released the first ETF featuring popular actor Jonathan Goldsmith yesterday. After Hashdex’s post earlier today, Bitwise released a second advertisement saying ‘Satoshi sends his regards.’
The frequent meetings from Grayscale and Blackrock and the positive advertisements hint that ETF approvals are just around the corner, with experts believing several applications will be approved by the SEC in January.
After consistently denying approval for a spot Bitcoin ETF for American investors over the years, there are indications that SEC chair Gary Gensler might be reconsidering his position in light of Grayscale’s legal triumph.
While he has not explicitly acknowledged any change in stance, he admitted taking a new look at the approval process of a spot Bitcoin ETF following the recent court rulings.
Softening Stance?
In an interview with CNBC’s “Money Movers,” Gensler said,
“I think it’s between eight and a dozen filings. I’m chair of a commission. I’m not to prejudge anything. So, that’s going through the process right now. And as you might know, we had in the past denied a number of these applications, but the courts here in the District of Columbia weighed in on that. And so we’re taking a new look at this based upon those court rulings.”
The District of Columbia Court of Appeals in Washington in August ruled that the SEC made an incorrect decision in denying approval for Grayscale’s proposed Bitcoin ETF. This ruling held significant importance for the industry, which has been seeking for a decade to progress and establish such crypto investment products.
Despite the hostility towards the sector, the SEC opted against appealing the court decision. This decision subsequently led to speculation that it may open the door for the regulatory agency to reconsider and assess Grayscale’s application.
In the latest interview, Gensler refrained from mentioning Grayscale but emphasized the SEC’s role in operating within the framework of laws established by Congress and interpreted by the courts. He also cautioned investors about prevalent noncompliance with securities laws designed to provide disclosure for informed investment decisions and protect against fraud and manipulation.
Besides Grayscale, several major asset management firms, including BlackRock, Fidelity, Invesco, VanEck, and Valkyrie, are currently competing to introduce a spot Bitcoin ETF. Although the approval process for all these applications has experienced delays, experts are confident approval is likely to take place in early January 2024.
Grayscale Optimistic Following Conversations With SEC
Grayscale has been eagerly eyeing a spot Bitcoin ETF after securing a court win against the SEC.
While specific timelines have not been disclosed, Michael Sonnenshein, the CEO of Grayscale Investments, expressed positivity regarding discussions with the SEC regarding the possibility of a spot Bitcoin ETF. The exec shared his optimism, stating that his firm has been actively involved in conversations with the regulatory watchdog.
He noted that the questions posed by the SEC suggest a willingness to engage on the matter and a desire to make advancements in this area.
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Binance founder CZ must stay in US until sentencing, judge orders
Binance founder Changpeng “CZ” Zhao has been ordered to stay in the United States until his sentencing in February, with a federal judge determining there’s too much of a flight risk if the former crypto exchange CEO is allowed to return to the United Arab Emirates. On Dec. 7, Seattle District Court Judge Richard Jones ordered Zhao to stay in the U.S. until his Feb. 23, 2024 sentencing date. He faces up to 18 months in prison after pleading guilty to money laundering on Nov. 21 and has agreed not to appeal any potential sentence up to that length.
House committee passes bill to ‘preserve US leadership’ in blockchain
A United States Congress committee has unanimously passed a pro-blockchain bill, which would task the U.S. commerce secretary with promoting blockchain deployment and thus potentially increase the country’s use of blockchain technology. The act covers an array of actions the commerce secretary must take if passed, including making best practices, policies and recommendations for the public and private sector when using blockchain tech. The bill will now go to the House for a vote. If passed, it must also pass in the Senate before returning for final congressional and presidential approval.
SEC pushes deadline to decide on Grayscale spot Ether ETF
The United States Securities and Exchange Commission has delayed its decision on whether to approve or reject a spot Ether exchange-traded fund (ETF) offering from asset manager Grayscale. In a notice, the SEC said it would designate a longer period for considering a proposed rule change that would allow NYSE Arca to list and trade shares of the Grayscale Ethereum Trust. Grayscale first filed with the SEC to convert shares of its Grayscale Ethereum Trust into a spot Ether ETF in October, adding its name to the list of companies awaiting a decision from the regulator.
Elon Musk’s xAI files with SEC for private sale of $1B in unregistered securities
Elon Musk’s X-linked artificial intelligence modeler, xAI, has an agreement for the private sale of $865.3 million in unregistered equity securities, according to a filing with the United States Securities and Exchange Commission made on Dec. 5. The company is seeking to raise $1 billion. XAI’s product, a chatbot called Grok, has recently rolled out to X’s Premium+ subscribers. Musk announced the launch of xAI in July and claimed its goal was to “understand the universe.”
Bitcoin new high set for late 2024, Binance to lose top spot — VanEck
Bitcoin will hit a new all-time high in late 2024 because of a long-feared United States recession and regulatory shifts after the next U.S. presidential election, asset manager VanEck predicts. The firm is confident that the first spot Bitcoin ETFs will be approved in the first quarter of 2024. However, it also made a gloomy prediction for the general U.S. economy. VanEck is among several firms, including BlackRock and Fidelity, that are vying for an approved spot Bitcoin ETF. VanEck also believes that the BTC halving, due in April or May, “will see minimal market disruption,” but there will be a post-halving price rise.
Winners and Losers
At the end of the week, Bitcoin (BTC) is at $44,402, Ether (ETH) at $2,364 and XRP at $0.66. The total market cap is at $1.65 trillion, according to CoinMarketCap.
Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Bonk (BONK) at 203.10%, ORDI (ORDI) at 134.34% and BitTorrent (BTT) at 114.32%.
The top three altcoin losers of the week are Maker (MKR) at -6.48%, UNUS SED LEO (LEO) at -6.22% and Kaspa (KAS) at 4.98%.
“It takes a community and the whole industry to figure out how to better educate people. That’s the hard part. It’s not a technology issue; it’s an operational problem.”
In a post on X (formerly Twitter) on Dec. 7, entrepreneur Alistair Milne noted that should current performance continue, Bitcoin will witness a crossover of two weekly moving averages (MAs), which have never delivered such a bull signal before.
The 50-week and 200-week MAs are key trendlines for Bitcoin traders and analysts alike. The latter is the ultimate bear market support level, and it has so far never decreased in value.
BTC price strength is on the way to taking the 50-week MA trendline above the 200-week counterpart. Known as a “golden cross,” on lower timeframes, this is considered a classic bullish signal, and for Milne, the impetus is that considerable upside could be in store should the phenomenon play out.
“The 50-week moving average will now soon cross back above the 200-week MA making a ‘golden cross’ for the 1st time. QED: Early bull market,” he wrote.
FUD of the Week
Crypto is for criminals? JPMorgan has been fined $39B and has its own token
JPMorgan Chase CEO Jamie Dimon is being criticized by the crypto community after claiming Bitcoin and cryptocurrency’s “only true use case” is to facilitate crime. However, according to Good Jobs First’s violation tracker, JPMorgan is the second-largest penalized bank, having paid $39.3 billion in fines across 272 violations since 2000. About $38 billion of these fines came under Dimon’s watch, who has been CEO since 2005.
British regulator adds Justin Sun-linked Poloniex to warning list after $100M hack
The United Kingdom’s Financial Conduct Authority (FCA) has added crypto exchange Poloniex to its warning list of non-authorized companies. The Seychelles-based exchange is one of the three companies owned by or affiliated with entrepreneur Justin Sun that have suffered four hacks in the last two months. The warning to Poloniex was published on the FCA’s website on Dec. 6. It doesn’t offer a reason but says that “firms and individuals cannot promote financial services in the UK without the necessary authorization or approval.”
US senators target crypto in bill enforcing sanctions on terrorist groups
A bipartisan group of lawmakers in the United States Senate introduced legislation aimed at countering cryptocurrency’s role in financing terrorism, explicitly citing the Oct. 7 attack by Hamas on Israel. The bill would expand U.S. sanctions to include parties funding terrorist organizations with cryptocurrency or fiat. According to Senator Mitt Romney, the legislation would allow the U.S. Treasury Department to go after “emerging threats involving digital assets.”
Lawmakers’ fear and doubt drives proposed crypto regulations in US
If the Digital Asset Anti-Money Laundering Act were to become law, many cryptocurrency providers would have to learn how to comply with the same regulations as traditional financial institutions.
Expect ‘records broken’ by Bitcoin ETF: Brett Harrison (ex-FTX US), X Hall of Flame
Shares for the Grayscale Bitcoin Trust (GBTC) – the world’s largest Bitcoin fund – are nearly back to parity with Bitcoin (BTC)’s price after trading deeply underwater for the past two years.
Their rising value reflects market confidence that Grayscale’s efforts to convert its fund into a Bitcoin spot ETF will prove successful.
The SEC’s Promising Meetings
Starting on Wednesday night, GBTC’s discount to NAV ratio shrank as low as 8.6%, according to Bloomberg ETF analyst Eric Balchunas.
The discount reflects the difference between the market cap of GBTC’s shares versus the total value of all BTC held by the trust.
According to the most recent figures from Grayscale’s website, the fund holds $33.75 in BTC per share, compared to a market price of $31.21 right now – a mere 7.5% discount as of Friday.
The reduction was “likely prompted by their updated filings/SEC meeting” on Wednesday, the analyst said.
At the time, separate memos from the Securities and Exchange Commission (SEC) showed that executives from Grayscale, BlackRock, and others held meetings with the SEC’s Division of Trading and Markets on Monday to discuss their respective ETF applications.
The meetings appeared to concern how fund managers would redeem shares of their trusts for underlying BTC whenever the shares began trading at a premium or discount to NAV. While firms like BlackRock are pushing for an “in-kind” redemption model, the SEC wants an in-cash model that doesn’t require issuers to directly touch BTC.
Major investors like Cathie Wood and Mike Novogratz – who themselves govern funds sponsoring separate ETF applications – have noted increased engagement from the SEC in helping to sharpen their products before they reach the market.
Rising Confidence in GBTC
The trend has increased investor confidence that the agency might finally be willing to approve an ETF, inviting investors to buy both GBTC and BTC. Not only is an ETF expected to invite major institutional flows into BTC, but it will also immediately restore the value of GBTC shares to that of the BTC they represent.
That’s a mouthwatering prospect for early GBTC investors, who will be exposed to the upside of both assets if they invest in the fund prior to its conversion. Back in December 2022, GBTC shares traded at a whopping 48% discount from their underlying BTC at just $8 per share.
Bloomberg analysts like Balchunas believe a Bitcoin spot ETF is 90% likely to be approved by January 10.
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Solana’s price is flying high again on crypto exchanges. However, regulated investors value SOL tokens at an astounding premium in Grayscale Solana Trust (GSOL).
The average SOL price on crypto exchanges was just under $62 Saturday afternoon U.K. time, according to data from CoinGecko. That puts the smart contract blockchain platform up over 49% in the seven-day window.
Furthermore, Solana is soaring over 180% on the 30-day scale after a stunning “Uptober” rally in crypto prices across the board.
Grayscale Solana Fund Shares Soar
But on Grayscale’s SOL fund, the DeFi blockchain’s tokens are doing even better. According to AAII, the fund provides a “cost-effective and convenient way to invest in SOL tokens (“SOL”) while avoiding the complication of directly holding SOL.”
Leaving no stone unturned, an X.com crypto sleuth took a look at the cryptocurrency hedge fund’s numbers Friday and did the math. Here’s what “jay on X” discovered:
Ok so…
– Greyscale SOL fund is trading at $125 a share – Each share holds 0.38 SOL – Implies $SOL is at $328 per token – 600% premium to NAV (using $55)
So, while retail traders, third-world denizens, and total “degens” are buying 1 SOL for $62 on crypto exchanges like Binance and KuCoin, smart money is buying 0.38 SOL for $125.
When you do the math, that comes out to $328 for each Solana token. This reveals that institutional investors are happy to pay the Grayscale premium to get Solana from a regulated, custodial Solana ETF fund.
“it gives us a gauge of demand from trad-fi, and its crystal clear trad-fi wants to bid $SOL”
Here’s the kicker: Just a day after “jay on X” posted their discovery, GSOL is trading at $202 per share, with the same 0.38 SOL per share. That’s a going price of $531 for 1 SOL token in Grayscale’s Solana ETF in OTC markets on Saturday.
Narratives matter.$ETH: $0 to $1400 to $80 to $4868$SOL: $0 to $260 to $8 to $1000
Don’t think this isn’t entering the mind of every investor.
There are currently 304,427 shares outstanding for a total assets under management of $6,344,128 in the Grayscale SOL fund. Here’s where people have been buying Solana the most over the past three weeks.
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ARK Invest, investor Cathie Wood’s firm, sold 66,342 units of Grayscale Bitcoin Trust (GBTC) for $1.66 million, at a closing price of $25.07 on Oct. 28, 2023.
The price of Bitcoin (BTC) currently sits at $34,434.
ARK Invest capitalizes on market recovery
Recent reports indicate that Wood, who founded ARK Invest in 2014, has been reshaping her portfolio. Wood divested Grayscale Bitcoin Trust (GBTC) shares while acquiring shares in a cryptocurrency-related stock.
On Oct. 28, the fund sold 66,342 units of GBTC, amounting to $1.66 million based on the closing price of $25.07.
This sale aligns with the broader pattern of ARK Invest divesting GBTC shares, involving the sale of approximately $2.5 million in GBTC shares on Oct. 24.
Ark Invest also sold GBTC shares in three sessions that week. On Oct. 24, around $2.5 million worth of GBTC shares were sold, equivalent to approximately 2% of ARK’s holdings in the trust. The following day, Oct. 25, ARK Invest sold about $1.8 million of GBTC shares for the second consecutive day. These GBTC sales might be connected to the firm’s filing for a Bitcoin-based ETF.
Additionally, on Oct. 28, ARK Invest invested $12.4 million in a crypto-linked stock, the specific name of which was not disclosed. Besides this, ARK Invest has been actively purchasing shares in other companies. On Oct. 24, the fund acquired $2.4 million worth of shares in the popular trading platform Robinhood (HOOD).
Crypto ETF’s breaking barriers
ARK Invest’s recent actions could be influenced by Bitcoin’s latest rally. The cryptocurrency’s value recently soared, reaching over $35,000 on Oct. 28.
The spike in Bitcoin’s price is also linked to a recent court ruling in the Grayscale and SEC legal battle and the approval of a spot Bitcoin ETF, which appears imminent, according to experts.
The U.S. Court of Appeals for the DC Circuit ruling stated that the Securities and Exchange Commission (SEC) was mistaken in denying Grayscale, a major crypto investment firm, the opportunity to launch the first Bitcoin exchange-traded fund (ETF). This decision has broader implications, potentially affecting other companies like BlackRock and Fidelity, who are also interested in creating Bitcoin ETFs.
The ruling, which faced multiple delays, stemmed from the SEC’s rejection of Grayscale’s application last summer. However, the denial was based on Grayscale’s inability to address concerns related to potential market manipulation and investor protections. Importantly, the SEC does not intend to challenge the recent court ruling, acknowledging its error in rejecting Grayscale Investments’ application for a spot Bitcoin ETF.
This legal outcome has narrowed the discount on Grayscale Bitcoin Trust shares, underscoring the increased importance of the underlying asset’s price. Additionally, the ruling has opened the door for Bitcoin exchange-traded funds, indicating a positive shift in the regulatory landscape.
ARK Invest, in addition to divesting shares in Grayscale Bitcoin Trust, has been acquiring shares in Robinhood. Notably, Wood has previously expressed confidence in Grayscale Investments, recognizing its significance within Barry Silbert’s Digital Currency Group.
Sam Bankman-Fried takes the stand on FTX’s collapse
Sam “SBF” Bankman-Fried testified this week in his ongoing criminal trial in the Southern District of New York, denying any wrongdoing between FTX and Alameda Research while acknowledging making “big mistakes” during the companies’ explosive growth. Highlights of his testimony include denying directing his inner circle to make significant political donations in 2021, as well as claims that FTX’s terms of use covered transactions between Alameda and the crypto exchange. Additionally, Bankman-Fried testified that he requested additional hedging strategies for Alameda in 2021 and 2022, but they were never implemented. The trial is expected to conclude within the next few days.
‘Buy Bitcoin’ search queries on Google surge 826% in the UK
Google searches for “buy Bitcoin” have surged worldwide amid a major crypto rally, with searches in the United Kingdom growing by more than 800% in the last week. According to research from Cryptogambling.tv, the search term “buy Bitcoin” spiked a staggering 826% in the U.K. over the course of seven days. In the United States, data from Google Trends shows that searches for “should I buy Bitcoin now?” increased by more than 250%, while more niche searches, including “can I buy Bitcoin on Fidelity?” increased by over 3,100% in the last week. Zooming out further, the search term “is it a good time to buy Bitcoin?” saw a 110% gain worldwide over the last week.
US court issues mandate for Grayscale ruling, paving way for SEC to review spot Bitcoin ETF
The United States Court of Appeals has issued a mandate following a decision requiring Grayscale Investments’ application for a spot Bitcoin exchange-traded fund (ETF) to be reviewed by the Securities and Exchange Commission (SEC). In an Oct. 23 filing, the “formal mandate” of the court took effect, paving the way for the SEC to review its decision on Grayscale’s spot Bitcoin ETF. The mandate followed the court’s initial ruling on Aug. 29 and the SEC’s failure to present an appeal by Oct. 13. To date, the SEC has yet to approve a single spot crypto ETF for listing on U.S. exchanges but has given the green light to investment vehicles linked to Bitcoin and Ether futures.
Coinbase disputes SEC’s crypto authority in final bid to toss regulator’s suit
The U.S. Securities and Exchange Commission overstepped its authority when it classified Coinbase-listed cryptocurrencies as securities, the exchange has argued in its final bid to dismiss a lawsuit by the securities regulator. In an Oct. 24 filing in a New York District Court, Coinbase chastised the SEC, claiming its definition for what qualifies as a security was too wide, and contested that the cryptocurrencies the exchange lists are not under the regulator’s purview. The SEC sued Coinbase on June 6, claiming the exchange violated U.S. securities laws by listing several tokens it considers securities and not registering with the regulator.
Gemini sues Genesis over GBTC shares used as Earn collateral, now worth $1.6B
Cryptocurrency exchange Gemini filed a lawsuit against bankrupt crypto lender Genesis on Oct. 27. At issue is the fate of 62,086,586 shares of Grayscale Bitcoin Trust. They were used as collateral to secure loans made by 232,000 Gemini users to Genesis through the Gemini Earn Program. That collateral is currently worth close to $1.6 billion. According to the suit, Gemini has received $284.3 million from foreclosing on the collateral for the benefit of Earn users, but Genesis has disputed the action, preventing Gemini from distributing the proceeds. Genesis filed for bankruptcy in January. It had suspended withdrawals in November 2022, which impacted the Gemini Earn program.
Winners and Losers
At the end of the week, Bitcoin (BTC) is at $34,143, Ether (ETH) at $1,789 and XRP at $0.54. The total market cap is at $1.26 trillion, according to CoinMarketCap.
Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Pepe (PEPE) at 72.08%, Mina (MINA) at 55.47% and FLOKI (FLOKI) at 53.33%.
The top three altcoin losers of the week are Bitcoin SV (BSV) at -10.27%, Toncoin (TON) -3.14% and Trust Wallet Token (TWT) at -0.82%.
“I should say, I am not a lawyer, I am just trying to answer based on my recollection. […] At the time [at] FTX, certain customers thought accounts would be sent to Alameda.”
“Without prejudging any one asset, the vast majority of crypto assets likely meet the investment contract test, making them subject to the securities laws.”
Gary Gensler, chair of U.S. Securities and Exchange Commission
“I do not believe there has been a single serious conversation regarding a settlement between Ripple […] and the SEC. The SEC is pissed and embarrassed and wants $770M worth of flesh.”
“He [Sam Bankman-Fried] thought he was going to take that money, and […] he would out-trade the market and put the money back and end up as a half-a-trillionaire, but it never works like that.”
Bitcoin beats S&P 500 in October as $40K BTC price predictions flow in
Bitcoin surfed $34,000 at the end of the week as attention turned to BTC price performance against macro assets. Data from Cointelegraph Markets Pro and TradingView showed BTC/USD holding steady, preserving its early-week gains.
The largest cryptocurrency avoided significant volatility as the weekly and monthly closes — a key moment for the October uptrend — drew ever nearer.
“I think Bitcoin will hang around this range for some time,” popular pseudonymous trader Daan Crypto Trades told X subscribers in one of several posts on Oct. 27. “Roughly $33-35K is what I’m looking at as a range. Eyes on potential sweeps of any of these levels for a quick trade,” he wrote.
FUD of the Week
UK passes bill to enable authorities to seize Bitcoin used for crime
Lawmakers in the United Kingdom have passed legislation allowing authorities to seize and freeze cryptocurrencies like Bitcoin if used for illicit purposes. Introduced in September 2022, the passed legislation aims to expand authorities’ ability to crack down on the use of cryptocurrency in crimes like cybercrime, scams and drug trafficking. One of the provisions of the bill permits the recovery of crypto assets used in crimes without conviction, as some individuals may avoid conviction by remaining remote.
Scammers create Blockworks clone site to drain crypto wallets
Phishing scammers have cloned the websites of crypto media outlet Blockworks and Ethereum blockchain scanner Etherscan to trick unsuspecting readers into connecting their wallets to a crypto drainer. A fake Blockworks site displayed a fake “BREAKING” news report of a supposed multimillion-dollar “approvals exploit” on the decentralized exchange Uniswap and encouraged users to visit a fake Etherscan website to rescind approvals. The fake Uniswap news article was posted on Reddit across several popular subreddits.
Kraken to suspend trading for USDT, DAI, WBTC, WETH and WAXL in Canada
Kraken will suspend all transactions related to Tether, Dai, Wrapped Bitcoin, Wrapped Ether and Wrapped Axelar in Canada in November and December. The suspensions may not surprise many Canadian cryptocurrency users, as they come on the heels of several other notable exchanges taking similar actions throughout 2023. OKX ceased operations in Canada in June after Binance announced its intention to do so in May.
5,050 Bitcoin for $5 in 2009: Helsinki’s claim to crypto fame
Cardano (ADA) has been slowly creeping into the mainstream and onto the radar of major players. This rising popularity of the cryptocurrency has led it to Grayscale, as the asset manager unveils a new way for institutional investors to gain exposure to Cardano.
Grayscale Announces Cardano Indices
On Tuesday, October 24, Grayscale Investmentsannounced that it is bringing five new crypto indices to the crypto market. These five indices would allow institutional investors to gain some level of exposure to a number of assets in the industry without having to go through the hassle of actually buying the coins.
Of the five indices that were announced, Cardano made the cut as one of the smart contract platforms that were being explored. This adds to the existing exposure already available to institutional investors through Grayscale Investments by way of the ‘Grayscale Smart Contract Platform Ex-Ethereum Fund’. This fund already sees Cardano maintain a 24% dominance, something that may be replicated in the new indices.
Cardano community member Dan Gambardello took to his X (formerly Twitter) platform to share the news. Gambardello explained that this could be a major game-changer for the crypto especially with institutional investors being given a way to play. “We’re talking big money, big players, and big validation for ADA,” he said.
Also, as Gambardello points out, the introduction of five new indices could suggest rising interest from large investors in cryptocurrencies other than Bitcoin. Gaining exposure to assets with lower market caps than the leading cryptocurrency could mean even larger profits for these institutional players, and Cardano could provide them with that opportunity.
“It’s clear that the institutional wave is coming for more than just Bitcoin. Cardano as a blue chip crypto is poised to ride that wave!” Gambardello concluded.
What Happens With Institutional Adoption?
As already seen with Bitcoin, institutional investor adoption of a cryptocurrency can mean a massive rally for the asset. This is because the buying power of institutional investors is much higher than that of retail investors, and with trillions of dollars in the hands of institutions, even a small percentage of their investment portfolio going into an asset could cause it to explode.
The recent Bitcoin rally above $35,000 following enthusiasm that the BlackRock Spot Bitcoin ETF might be approved soon is a perfect example of this. Market experts have said they expect upwards of $100 billion to flow into BTC if a Spot Bitcoin ETF is approved.
This high-value injection could also be incredible for Cardano which is already being viewed as a serious investment by these large players. This can easily lead the ADA price back above $1 with the right set of circumstances.
In an Oct. 24 announcement, Grayscale shared news of a new FTSE Grayscale Crypto Sector Index Series, comprising five rules-based indices.
The decision was made as a way to provide a comprehensive representation of Grayscale’s Crypto Sectors in the investable crypto market.
Monitoring performance in five categories
The newly introduced FTSE-Grayscale indices are designed to monitor the performance of cryptocurrency assets across five distinct categories, which include currencies, smart contract platforms, financials, consumer and culture and utilities and services.
In conjunction, we are introducing a new partnership with @FTSERussell and debuting the FTSE Grayscale Crypto Sector Index Series (“Crypto Sector Indices”), a set of 5 distinct, rules-based indices capturing the investable crypto market of Grayscale Crypto Sectors. (3/11) pic.twitter.com/SyH1zFU70h
A follow-up post states that it will encompass over 150 protocols and will undergo quarterly reassessment to adapt to the ever-evolving nature of the crypto asset class.
“Investors have increasingly expressed interest in diversifying beyond crypto’s largest assets, Bitcoin and Ethereum, and many look to Grayscale to better understand this robust, evolving asset class,” Grayscale CEO Michael Sonnenshein wrote on X.
In the future, Grayscale shares that this release will lead to various tools and structures that will be able to monitor themes, risks, and opportunities of the asset class, in an attempt to provide a basis for more informed investing.
Active pursuit of the crypto industry
Grayscale continues to be seen in news headlines for its efforts in expanding its reach in the crypto space, with several announcements surrounding its Bitcoin exchange-traded fund (ETF).
A few days earlier, on Oct. 19, the leading crypto asset manager had also submitted a fresh registration statement to the U.S. Securities and Exchange Commission as part of its persistent efforts to transform the Grayscale Bitcoin Trust into a standard Bitcoin ETF.
Coinbase chief legal officer Paul Grewal has expressed optimism that the U.S. Securities and Exchange Commission (SEC) will soon approve a Bitcoin exchange-traded fund (ETF).
Grewal told CNBC that he is confident in the approval of a U.S. Bitcoin ETF from the SEC “in short order.”
Grewal’s assertion comes after a big court decision that found the SEC had no grounds to deny asset management firm Grayscale its application to turn its GBTC Bitcoin (BTC)fund into an exchange-traded fund.
Additionally, the regulator opted not to appeal the court’s ruling, sparking speculation within the industry that Bitcoin ETF approvals were on the horizon.
Despite ongoing legal complications involving Grayscale’s parent company, Digital Currency Group and the Gemini crypto exchange, Grewal remains optimistic about the prospect of additional Bitcoin ETFs being approved.
The Coinbase attorney, however, did not give a specific timeframe within which he expects the approvals to be granted, instead clarifying that he expects the agency will have to fulfill its legal obligation following the court’s decision.
“I think that, after the U.S. Court of Appeals made clear that the SEC could not reject these applications on an arbitrary or capricious basis, we’re going to see the commission fulfill its responsibilities. I’m quite confident of that.”
Paul Grewal, Coinbase chief legal officer
Retail investors might find this development appealing, especially those wanting to get exposure to Bitcoin without purchasing the cryptocurrency directly from an exchange.
Firms like Coinbase, which is the largest crypto exchange in the U.S., are expected to benefit significantly from any ultimately approved Bitcoin ETF.
In the interview, Grewal also shared his opinion about the ongoing trial of former FTX CEO Sam Bankman-Fried, who is facing several charges of conspiring to defraud FTX investors. The Coinbase insider stated that he is “encouraged” and “optimistic” that bad actors were being brought to book through such trials and rigorous regulations.
Grayscale files for new spot Bitcoin ETF on NYSE Arca
Major cryptocurrency investment firm Grayscale Investments has filed a new application with the U.S. Securities and Exchange Commission for a new spot Bitcoin exchange-traded fund (ETF). The new filing aligns with Grayscale’s ongoing effort to convert its Grayscale Bitcoin Trust into a spot Bitcoin ETF, according to a statement from the firm. The news comes weeks after Grayscale won an SEC lawsuit for its spot Bitcoin ETF review, with a court of appeals ordering the SEC to explain why it rejected Grayscale’s application in June 2023. The company also filed with the SEC to list an Ether futures ETF in September.
New York Attorney General sues Gemini, Genesis, DGC for allegedly defrauding investors
New York’s attorney general has filed a lawsuit against cryptocurrency firms Gemini, Genesis and Digital Currency Group (DCG) for allegedly defrauding more than 23,000 investors through the Gemini Earn investment program. The suit claims that Gemini assured investors that the program was a low-risk investment, while investigations carried out by the office of New York State Attorney General Letitia James found that Genesis’ financials “were risky.” The lawsuit also charges Genesis’ former CEO, Soichiro Moro, and its parent company’s CEO, Barry Silbert, with defrauding investors by attempting to conceal more than $1.1 billion in losses. In addition, the court case looks to ban Gemini, Genesis and DCG from operating in the financial investment industry in New York.
Former FTX engineering director faces up to 75 years in prison following guilty plea
Nishad Singh, the former engineering director at now-defunct crypto exchange FTX, faces up to 75 years in prison for charges related to defrauding users of the crypto exchange. He pleaded guilty to fraud charges as part of his cooperation agreement with the U.S. prosecutors. During his testimony this week, Singh said that when liquidity issues at FTX began in November 2022, he felt “suicidal for some days” while dealing with alleged inconsistencies between the exchange’s public statements and its activities behind the scenes. Singh also claimed that Bankman-Fried had the habit of deciding on purchases through Alameda Research by himself.
Binance shutting down European Visa debit card in December
Elon Musk, Mark Cuban team up to contest SEC trial strategies
Elon Musk, Mark Cuban and others have collaboratively submitted a shared amicus brief to the Supreme Court of the United States to raise concerns about the U.S. Securities and Exchange Commission’s (SEC) approach to conducting internal proceedings without the inclusion of juries. The context of this legal challenge centers around the SEC vs. Jarkesy case. George Jarkesy argues that the SEC’s internal adjudication process, which lacks a jury and is overseen by an administrative law judge appointed by the commission, contradicts his Seventh Amendment rights. Effectively resulting in a single entity fulfilling the roles of judge, jury and enforcer.
Winners and Losers
At the end of the week, Bitcoin (BTC) is at $29,590, Ether (ETH) at $1,607 and XRP at $0.52. The total market cap is at $1.12 trillion, according to CoinMarketCap.
Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Bitcoin SV (BSV) at 59.00%, Stacks (STX) at 25.91% and MX TOKEN (MX) at 25.26%.
The top three altcoin losers of the week are Conflux (CFX) at -8.03%, Frax Share (FXS) and Sui (SUI) at -6.35%.
“Using publicly available information to learn is not stealing. Nor is it an invasion of privacy, conversion, negligence, unfair competition, or copyright infringement.”
“After extensive DAO forum discussion followed by community vote, the sunsetting of the Lido on Solana protocol was approved by Lido token holders and the process will begin shortly.”
BTC price hits 2-month high amid bet Bitcoin will break $32K ‘soon’
On Oct. 20, data from Cointelegraph Markets Pro and TradingView captured new two-month Bitcoin highs of $30,233 on Bitstamp. BTC price showed continued strength during the Asia trading session on the same day, with a slight comedown taking the spot price back below $29,500.
With volatility still evident, market participants argued that a weekly candle close was needed in order to establish the rally’s true staying power. For Keith Alan, co-founder of monitoring resource Material Indicators, the 100-week moving average (MA) at $28,627 was of particular importance.
“This move is one to watch, but what I’m watching for right now is to see if this Weekly candle closes above the 100-Week MA and if next week’s candle can stay above it with no wicks below,” Alan wrote in part of an X post on the day. “Some might consider that a confirmation of a bull breakout, but this market is known for squeezes and fake outs so I’m looking for more confirmations. For me BTC will also need to take out prior resistance at $30.5k, $31.5k and ultimately $33k to call a bull breakout confirmed and validated.”
FUD of the Week
Fantom Foundation hot wallet hacked for $550K
The Fantom Foundation, the developer of the Fantom network, has been hacked for over $550,000 worth of cryptocurrency. The foundation confirmed the attack on X, claiming that most of the funds stolen belonged to other users and that 99% of the foundation’s funds remain safe. Blockchain security researchers initially reported that the attacker stole approximately $7 million in crypto. The Fantom Foundation later released an official statement saying that some of the wallets labeled “Fantom: Foundation wallet” were mislabeled by block explorers and that not all the stolen funds were from the foundation.
TrueCoin’s third-party vendor breach potentially leaks TUSD user data
TrueUSD (TUSD) announced a potential leak of certain Know Your Customer (KYC) and transaction history data after one of TrueCoin’s third-party vendors was compromised. The company was the operator of the TUSD stablecoin until July 13, 2023. The impact of the attack and the resultant data leak is yet to be identified, as the total number of users’ data was not revealed during the announcement. Data collected from such breaches — names, email addresses and phone numbers, among others — are typically used for phishing attacks. Attackers reach out to unwary investors by mimicking various crypto services, often promising high profits in short amounts of time.
Web3 game project allegedly hired actors to pose as executives in $1.6M exit scam
The development team for gaming project FinSoul carried out an alleged exit scam, siphoning away $1.6 million from investors through market manipulation, according to a recent report from blockchain security platform CertiK shared with Cointelegraph. The FinSoul team allegedly hired paid actors to pretend to be its executives, then raised funds for the sole purpose of developing a gaming platform. However, instead of actually creating the platform, the FinSoul team allegedly transferred $1.6 million in bridged Tether from investors to itself. Blockchain data indicates developers then laundered the funds through cryptocurrency mixer Tornado Cash.
Big Questions: What did Satoshi Nakamoto think about ZK-proofs?
What was once a passing interest of Bitcoin inventor Satoshi Nakamoto, zero-knowledge-proof technology is now a major part of the crypto world.
Ethereum restaking: Blockchain innovation or dangerous house of cards?
“Restaking” involves reusing staked Ether to earn fees and rewards. The restaked tokens can then help secure and validate other protocols. But many fear restaking could disrupt Ethereum’s chain itself.
Bitmain’s revenge, Hong Kong’s crypto rollercoaster: Asia Express
Bitmain allegedly fires staff for speaking out against salary cuts, Hong Kong investors lose faith in crypto after JPEX scandal, Bitget gets a new crypto credit card and more.
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Valkyrie Investments has laid out a proposal to take up the reins of troubled bitcoin trust GBTC.
“We understand that Grayscale has played an important role in the development and growth of the bitcoin ecosystem with the launch of GBTC, and we respect the team and the work that they have done,” Valkyrie’s co-founder and CIO, Steven McClurg, said in a statement posted to the company’s website. “However, in light of recent events involving Grayscale and its family of affiliated companies, it is time for a change. Valkyrie is the best company to manage GBTC to ensure its investors are treated fairly.”
McClurg told Bitcoin Magazine that the proposal would be for current GBTC shareholders to vote on via proxy. If chosen by the shareholders, Valkyrie would become the sponsor.
The process isn’t as straightforward as it seems, however. As highlighted on a Bloomberg report, “Grayscale filings state that shareholders take no part in the management or control of the trust, and have limited voting rights. In addition, no amendments to the trust agreement that could materially affect the interests of shareholders can be made with a vote of at least a majority — meaning 50% — of the shares.”
McClurg explained to Bitcoin Magazine that Valkyrie is aware of those issues, and has planned ahead. He declined to comment on any specifics of what that plan might entail, but hinted that this wouldn’t be their first time achieving such a goal. When it comes to the plans for after an eventual takeover, McClurg has it laid out.
The first action Valkyrie would take in the event that it becomes GBTC’s sponsor and manager would be to “immediately file for Reg M exemption,” the executive explained. Grayscale CEO Michael Sonnenshein told Yahoo Finance earlier this month that the trust not allowing redemptions is a result of a U.S. Securities and Exchange Commission (SEC) shutdown in 2014, who found GBTC redemptions to be in violation of Reg M. According to FINRA, the SEC’s Regulation M “is designed to prevent manipulation by individuals with an interest in the outcome of an offering, and prohibits activities and conduct that could artificially influence the market for an offered security.”
“If approved by the SEC, [the exemption] would allow us to redeem shares at par value for shareholders who want to redeem,” McClurg told Bitcoin Magazine.
The move would allegedly help alleviate what might currently be GBTC’s most pressing issue: a whopping 47% discount of its shares compared to the value of the underlying assets held.
“Redemptions typically cause a discount to narrow due to ability of market makers to arbitrage,” Valkyrie’s executive added.
McClurg said the firm would also reduce the management fee to 75 basis points, down from the 200 basis points currently levied by Grayscale.
It isn’t clear whether Grayscale has sought Reg M exemption yet, and McClurg told Bitcoin Magazine that “nothing is stopping Grayscale from doing this themselves.” GBTC’s current manager is seeking a conversion of the trust into a spot bitcoin exchange-traded fund –– something it claims would eliminate the discount given the ability of an ETF to create and redeem shares on demand. It has gone as far as to sue the SEC under the basis that the regulator allowed the listing of futures-based products and doesn’t have the grounds to deny similar spot offerings. This could seemingly help explain the firm’s reluctance to apply for Reg M exemption, as an eventual exemption from the SEC could reduce the discount to near zero and kill its leverage for the ETF move. It isn’t clear whether that is the case, however. Valkyrie would still pursue the conversion if turned GBTC’s manager.
“We would still attempt a conversion, but would work with regulators for an orderly conversion on their time,” McClurg said.
Grayscale CEO Michael Sonnenshein stated in a letter to investors that should the Grayscale Bitcoin Trust fail to convert into an exchange-traded fund (ETF), potential moves could include a tender offer of 20% of the $10.7 billion trust.
A tender offer would appeal to shareholders to offload their shares at a specific time, effectively returning the value invested back to them.
Grayscale’s Bitcoin Trust was originally planned to trade like a bitcoin proxy as it sought ETF status, involving a net asset value (NAV) discount or premium. The premium or discount describes the difference in value between shares of the trust and the value of the underlying bitcoin held. When the value of the shares of the trust are higher than the underlying bitcoin, it is considered a premium. When the value of the shares drop below the underlying bitcoin, it is considered a discount.
Investors have recently had to consider their options as the trust faces a continued decline in value, widening the discount to 50%, a record low, stoking fears of already jumpy investors. There is no way to extract bitcoin out of the trust.
Grayscale has been attempting to acquire ETF status for a while, and most recently after being denied, filed a lawsuit against the U.S. Securities and Exchange Commission (SEC). In the lawsuit, Donald B. Verrilli Jr., Grayscale’s senior legal strategist and former U.S. solicitor general, stated that “As Grayscale and the team at Davis Polk & Wardwell have outlined, the SEC is failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.”
Despite the SEC’s repeated denial of a spot ETF, it has approved multiple futures ETFs, starting with the ProShares BITO ETF in October of 2021. The reasoning behind this, according to Chairman Gary Gensler, is that futures have “Bitcoin futures have been overseen by sibling agency CFTC for 4 years. That’s wrapped inside the 1940 Act which brings it inside investor protection.”
Coinbase filed an amicus brief supporting Grayscale Investments’ continued efforts to launch a spot-bitcoin exchange-traded fund (ETF), per a court filing.
Amicus briefs, or an amicus curiae, occurs when an organization or individual who is not involved in a court case believes they can offer expertise that could be valuable to a court’s determination by providing information.
The brief, submitted to to the U.S. Court of Appeals for the District of Columbia Circuit explains that the Securities and Exchange Commission (SEC) has “categorically denied every proposal” for spot bitcoin ETFs in the U.S.
Participants of the brief, including the Blockchain Association, the Chamber of Digital Commerce and Coin Center stated that “The Commission’s ‘thumb on the scale’ approach does not withstand scrutiny.”
The groups go on to explain that, while a spot bitcoin ETF continues to be blocked, the SEC has found no fault in approving bitcoin futures saying the regulator has allowed “similar, riskier products to enter the market.”
This past June, Grayscale announced it was suing the SEC for repeatedly denying the fund the ability to convert to a spot bitcoin ETF which would allow Grayscale to physically hold bitcoin on behalf of its investors.
By that time, Grayscale had already acquired a top legal mind from President Obama’s administration to lead its legal efforts against the SEC.
The initial request to transition the fund into an ETF was announced in April of last year. The process continues to be an ongoing battle of litigation, with the SEC hiding behind investor and consumer protections without providing constructive feedback on what is necessary to move this investment vehicle forward.
