Bitcoin ETF stalls as SEC flags first Trust SkyBridge plan

The US Securities and Exchange Commission (SEC) has recently directed First Trust Advisors and SkyBridge Capital to consider their Bitcoin exchange-traded fund (ETF) application as abandoned. This directive came after the firms failed to respond to previous communications from the SEC regarding their registration statement. The notice was issued on a Wednesday, marking a significant development in the ongoing saga of Bitcoin ETF applications in the United States.

First Trust Advisors, in partnership with SkyBridge Capital—a hedge fund led by former White House Communications Director Anthony Scaramucci—originally submitted their Bitcoin ETF application in March 2021. Despite adjustments to their application, they faced rejection in January 2022. Unlike other firms that re-applied following the SEC’s approval of BlackRock’s Bitcoin ETF, First Trust, and SkyBridge did not submit a new application.

The landscape of Bitcoin ETF applications

The refusal to re-apply for a Bitcoin ETF after the approval of BlackRock’s ETF has puzzled industry observers. Eric Balchunas, a senior ETF analyst at Bloomberg, noted the absence of First Trust from the post-approval race, highlighting the firm’s potential to impact the market significantly. This decision stands out, especially considering the aggressive nature of First Trust’s sales strategies. Meanwhile, Global X also withdrew its application for a spot Bitcoin ETF in late January following delays and documentation issues.

The SEC’s hesitation to approve spot Bitcoin ETFs remains a hurdle for many applicants. Despite this, Bitcoin’s price has soared, reaching an all-time high of $72,953 and significantly increasing over the past month. The anticipation around the approval of options trading on spot Bitcoin ETFs and the consideration of multiple leveraged Bitcoin ETFs indicates a growing interest in cryptocurrency investment products. Analysts suggest that the introduction of $BTC ETF options could attract new players to the cryptocurrency market, including hedge funds.

Bitcoin ETFs: A new market phenomenon

Bitcoin ETFs have seen unprecedented success in their launches, with significant accumulations of Bitcoin in a short period. These products now hold assets close to $30 billion, with over 30,000 $BTC accumulated in the previous week alone. This surge in demand for Bitcoin ETFs suggests a potential liquidity crisis, where the demand for Bitcoin could outstrip the available supply.

The SEC’s decision to delay the approval of new Bitcoin ETF applications, including those for options trading, indicates a cautious approach to cryptocurrency investment products. However, the market’s response to existing and potential Bitcoin ETFs highlights the growing integration of cryptocurrencies into mainstream investment strategies. The evolving regulatory landscape and market dynamics continue to shape the future of Bitcoin ETFs and cryptocurrency investment at large.