JP Morgan’s Bold Prediction: Bitcoin ETF Bonanza Looms After Grayscale’s Legal Win

The US Securities and Exchange Commission’s decision to approve a Bitcoin futures ETF and reject spot Bitcoin ETF has been under discussion lately following the court’s order for the Commission to go back and review Grayscale Investments’s application. Several spot Bitcoin ETF applications from the likes of Tyler and Cameron Winklevoss, Ark Invest, etc. have suffered the same fate. The reason for the rejections was linked to potential market manipulation and fraud

The Spot Market and Futures Market Similarity

According to the SEC, the CME-listed Bitcoin futures market is sufficiently large and perfectly regulated to prevent manipulation, hence, the reason for its approval. Interestingly, this explanation was not convincing enough to win the lawsuit against Grayscale. According to the court, the Commission did not provide enough explanation for its different treatment of similar products

According to Grayscale, the correlation between the two markets is 0.999. This indicates that spot BTC ETF would have a similar material exposure as futures-based ETF.

Another argument was made regarding the significant market test. This was part of the reasons for rejecting the asset manager’s application.

This includes:

a market (or group of markets) as to which (a) there is a reasonable likelihood that a person attempting to manipulate the ETP would also have to trade on that market to successfully manipulate the ETP so that a surveillance-sharing agreement would assist in detecting and deterring misconduct, and (b) it is unlikely that trading in the ETP would be the predominant influence on prices in that market.

In a recent comment by JPMorgan analysts, there is a high possibility of the SEC approving Grayscale’s conversion of Bitcoin Trust (GBTC) into a spot ETF. To avoid this, the Commission would have to reconsider its approval of futures-based Bitcoin ETF. However, this may not be the case as it could be embarrassing to them

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[The delays applied to Bitcoin ETF decisions] likely points to approval of multiple spot Bitcoin ETF applications at once rather than granting a first-mover advantage to any single applicant.

Would a Spot Bitcoin ETF Approval Lead to a Bull Run?

Many crypto investors are expecting a price surge following a spot ETF Approval. However, JPMorgan expects otherwise. According to the analysts, a spot BTC ETF approval would not lead to any considerable price surge. The reason is that similar approvals in Canada and Europe failed to propel the market to a new height.

Regardless, GBTC investors reacted positively to this development as GBTC’s price to NAV narrowed from 40 percent to 18 percent in June 2023. The crypto market showed signs of recovery as BTC staged a bounce back to hit $28k before taking a nosedive to trade below $26k. According to analysts, investors exited their positions due to the delay of SEC’s spot Bitcoin ETF decision which was expected to be taken by Friday

BTC has fallen by 1 percent in the last seven days, taking its market cap to $500,327,079,329. With a bearish market sentiment, its safety score is currently around 40/100

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