Bitcoin Returns As US Court Clears Path for ETFs
US courts have been swamping the Crypto Currency sector for quite some time now causing sell pressure and sending markets lower each day. While Bitcoin loyalists have remained strong as we saw many people dump alts to drive efforts into picking up cheap Bitcoin, causing the coin to increase it's market dominance.
But with all the negative news surrounding the Securities and Exchange Commission (SEC) there was bound to be a quick win for the average punter somewhere. This latest court ruling comes as a blow to the SEC who has been trying to drive crypto down and rein in all the operators.
It looks like it will be back to the drawing board for the SEC as this latest loss for them will undoubtedly open the flood gates to many other firms who are seeking to establish a Bitcoin ETF. There are some interesting aspects with the latest case that perhaps shows the SEC is under a lot of pressure and struggling to keep up pace with the growing Crypto sector.
The Greyscale Battle
In June 2022 Greyscale filed a petition against the SEC to contest their decision to not support the Greyscale proposal to convert the companies Bitcoin Trust to a Spot Bitcoin ETF. The company immediately commenced legal proceedings having received growing pressure from their clients about access to Bitcoin and digital asset markets.
In a reply brief the SEC states that it believes it reasonably interpreted and acted reasonably under the Exchange Act by
disapproving the proposed rule change. It is important to note that in their reply brief they raise the voluntary surveillance agreed to by Coinbase.
The SEC references occurrences to in the 1920s and 1930s with past economic collapses where regulatory oversight did not occur. While the SEC agrees that Bitcoin could be traded as an ETF sometime, their main concern is the ability for regulators to oversee operations stating:
"demonstrate in a proposed rule change that it will be able to address the risk of
fraud and manipulation by sharing surveillance information with a regulated
market of significant size related to bitcoin, as well as, where appropriate, with the
spot markets underlying relevant bitcoin derivatives."
Effectively the SEC's current issue is that they have seen all these players like FTX, Luna and many other collapsed exchanges play in the market and they are concerned about the risks of market manipulation. There is quite a lot in that brief and I would recommend everyone read it to get a grasp of what the SEC currently things and is trying to achieve more broadly.
Greyscale Strikes Back
Greyscales response hitting back at the SEC is quite the read and I would also encourage people to read through it. It's quite the war or words. In it Greyscale hits back in an interesting manner, it is as if it is calling the SEC something...
Final pages of the brief Greyscale responds stating that the SEC continues to alter their reasons for blocking the ETF and just outright accuses them of playing mum and dad by decided what people can and can't spend their money on. The statement reads:
lack of reasoning underlying its approach. The
Commission is not permitted to decide for investors whether certain investments
have merit—yet the Commission has done just that, to the detriment of the investors
and potential investors it is charged to protect.
There are a few other points that Greyscale raises that one could say makes sense. That being a core reason that the SEC was blocking the ETF was around risk and the possibility of market manipulation. Greyscale responded to their statement by pretty much showcasing that they are an exchange that complies with regulation and sell other assets and Bitcoin would just be another asset. They also showcase how their current market is stable and is being referred to by other traders to determine the Bitcoin price.
Greyscales Home Run Pitch
The SEC has some trouble coming for it in relation to this case and it was probably already over even before it started and Greyscale knew it. Although it has provided a great insight into the SEC and it's position. But the home run pitch for the court ruling was where Greyscale pulled this statement:
But the Commission approved bitcoin futures ETPs even though the
Commission recognized that they did not satisfy that requirement. Here, in contrast,
the Commission denied approval on the ground that the very same requirement was
not satisfied.
Effectively Greyscale was able to prove without doubt that the SEC was not acting fairly or just in that it had already approved Bitcoin ETPs for Valkyrie and Teucrium who hold futures contracts on the Chicago Mercantile Exchange. As they state that it doesn't matter what kind of Bitcoin market it is, it is still Bitcoin and the same risks raised by the SEC for denial should apply to ALL Bitcoin markets.
Fortunately for Greyscale it was enough to get all judges to side with them and approve their Bitcoin Spot ETF.
The market reacted positively with Bitcoin rising by 3.4% at time of writing with USD57 Billion in trading volume occurring. The decision will also likely set the standard for other exchanges to commence their ETFs as well as provide a new line of hope for Coinbase and Ripple who are currently battling the SEC on similar things.
image sources provided supplemented by Canva Pro subscription. This is not financial advice and readers are advised to undertake their own research or seek professional financial services.