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Grayscale Vs. SEC - What Does Having A Spot Bitcoin ETF Mean For You?

19 October 2023 11:14, UTC

It all started in October 2021 when Grayscale Investments proposed to launch a spot Bitcoin ETF and appealed to the SEC. Later, in June 2022, the SEC declined Grayscale’s appeal to list its Grayscale Bitcoin Trust (GBTC) as a spot Bitcoin ETF.

This legal battle has already gained much attention from crypto enthusiasts around the US. While Grayscale is at the forefront of this battle, here is what it means for you as an investor.

Explaining the underlying purpose behind the asset manager’s plea and why the SEC is skeptical of creating a spot Bitcoin ETF, we will explain everything.

What Is A Spot Bitcoin ETF?

The whole quarrel is about the spot Bitcoin ETF, and what if you need to be better versed in the subject? Before discussing the entire scenario, let’s begin with the fundamentals. In contrast to the Futures Bitcoin ETF, which works with a preset speculative value of Bitcoin, a Spot Bitcoin ETF is a financial instrument that monitors the real-time Bitcoin price.

With this kind of ETF, investors can invest in this digital asset without owning it. It’s like traditionally investing in modern assets for traditional investors unfamiliar with cryptos. There will be no regulatory, cost, or safety challenges, and it will be a thousand times simpler than the actual Bitcoin trading.

However, this is the fundamental concept of spot Bitcoin ETFs; the main concern is how platforms offering spot Bitcoin ETFs will regulate it and keep investors from manipulation.

Grayscale’s Legal Battle with the SEC

The asset management company’s journey to start a Spot Bitcoin ETF has been challenging. Grayscale Investments took on the SEC after their initial request to convert their Grayscale Bitcoin Trust (GBTC) into a listed Spot Bitcoin ETF was rejected in June 2022. Grayscale challenged this decision, pointing to the SEC’s prior approval of ETFs based on Bitcoin futures contracts.

The Industry reached a significant legal milestone on August 29, 2023, when the District of Columbia Court of Appeals ruled that the SEC rejected Grayscale’s proposal without a reasonable explanation. The SEC could appeal but chose not to, indicating that the SEC will review Grayscale’s proposal again. If approved, this would mark a major victory for the cryptocurrency industry.

However, what will the SEC’s decision and Grayscale’s victory bring the investors? Read on to know how this request impacts the investors and which doors it opens for you.

What Does A Spot Bitcoin ETF Mean For Investors?

All eyes are on the news for the final decision by the SEC; however, why does it hold so much importance for the investors? Spot Bitcoin ETF represents an achievable milestone in cryptocurrency for both experienced and novice traders.

Ease of Accessibility for Investors

Investing in Bitcoin, the world’s most popular and oldest cryptocurrency, seems intimidating to investors. Setting up an account with the trading platform, developing a strategy, analyzing price movements, keeping it secure in a wallet, securing wallet keys, and learning blockchain technology is new and overwhelming for many potential investors. A spot bitcoin ETF will eliminate these barriers and provide a more simplified investment process.

Making it accessible for investors, buying such an ETF is as straightforward as buying shares in a stock, and they can do it through regular brokerage accounts.

No Fear Of Ownership Risks

Most prospects of crypto investments are afraid of the burden of owning cryptocurrencies. Direct ownership of cryptocurrencies comes with unique risks, i.e., managing your digital wallet and safeguarding your private keys. There is always a fear of cyberattacks, misplacing keys, losing access to funds, or systems corruption among investors.

A Spot Bitcoin ETF will be a better alternative to Bitcoin or any other cryptocurrency. The ETF will handle the technical intricacies, significantly reducing the risk of personal errors or vulnerabilities.

A Catalyst For Cryptocurrency Market

Considering the current market conditions, if Spot Bitcoin ETF gets approved by the SEC, there is a huge chance that Bitcoin price will increase. Crypto experts have predicted this move could catalyze demand for Bitcoins, raising their prices.

You might be thinking about how an ETF can make fluctuations in the prices of the original Bitcoin asset. Simple! When investors have easier and safer access to Bitcoins, they are likely to put their funds into one of the most promising digital assets, Bitcoin.

It is evident in the past that when Futures Bitcoin ETF or other Bitcoin-related projects got approvals, the industry witnessed substantial growth in Botcoin’s demand and its prices. A Spot Bitcoin ETF approval could trigger a similar reaction, benefiting those already invested in Bitcoin.

What’s In It For Traditional Investors?

By traditional investors, we mean those individuals familiar with stocks, shares, bonds, and mutual funds and are regular investors of these old-school investment vehicles. These traditional investors are consistent about trading and treat trading as a business.

But what if they were just hesitant to enter the cryptocurrency landscape? What if digital wallets and blockchain may feel foreign and challenging to those familiar with traditional financial instruments?

A Spot Bitcoin ETF bridges this gap. It offers a structured, regulated investment vehicle that aligns with traditional market practices. For investors who prefer familiarity and regulatory oversight, this ETF opens a door to cryptocurrencies without requiring a complete shift in their investment mindset.

Competition and Wider Industry Interest

Grayscale isn’t the only player on the field. Other financial giants, including Invesco, BlackRock, Fidelity, and Ark Invest, have their eyes on launching Spot Bitcoin ETFs. The SEC currently holds applications for spot Bitcoin ETFs from several other firms, including WisdomTree, VanEck, Bitwise, and Valkyrie. The competition and wider interest in this space underscore the growing demand for these investment vehicles.

When may the Spot Bitcoin ETF launch? Speculations range from before the end of 2023 to the end of 2024. The timing could significantly impact Bitcoin’s price and the broader cryptocurrency market.

Final Thoughts

The inception of the Spot Bitcoin ETF will bring great change for investors and become a huge milestone in normalizing the use of cryptocurrency as an investment vehicle. This ETF will bloom the crypto trading concept among traditional investors and encourage new traders to invest in the world’s first cryptocurrency, Bitcoin.

We suggest our readers to align their investment choices with their long-term investment goals and risk tolerance. Although they pose significant risks, digital currencies like Bitcoin can provide large rewards. As the crypto landscape evolves, keep a watchful eye on the opportunities and challenges it presents.