Bitcoin ETFs are not approved yet, but analysts think they could become a reality in January

By Frances Yue

A false report that the U.S. approved a crypto-based exchange-traded fund led to a bitcoin price rally Monday. However, such products are likely to be greenlighted in January next year, analysts said.

Bitcoin (BTCUSD) briefly reached as high as $29,976 on Monday with a 10% increase, before giving up most of the gains, according to CoinDesk data.

The rally was spurred by a now-deleted post on the social platform X by the crypto news service Cointelegraph, which said that the U.S. Securities and Exchange Commission had approved BlackRock(BLK)'s application for an ETF that invests directly in bitcoin. "We apologize for a tweet that led to the dissemination of inaccurate information regarding the Blackrock Bitcoin ETF," Cointelegraph said in a follow-up statement on social media.

Read: Bitcoin price briefly rallies 10% on false spot ETF report

A Blackrock spokesperson told MarketWatch that the iShares Bitcoin ETF is "still under review by the SEC."

The SEC has approved several bitcoin futures ETFs in the past, but has yet to greenlight anything based on bitcoin itself, citing vulnerability to market manipulation.

The agency faces a final deadline to respond to ARK Invest and 21Shares's spot bitcoin ETF application by January 10, 2024, and BlackRock's application by March 15 next year.

"We believe there's a 90% chance of approval by Ark's Jan.10 deadline," James Seyffart, ETF analyst at Bloomberg Intelligence wrote in a recent note.

The SEC chose not to appeal an August federal court ruling, which ordered the agency to vacate its rejection of Grayscale Investments' application to convert its Bitcoin Trust product into an ETF. The agency faced a deadline last Friday to appeal the ruling.

Approval of spot bitcoin ETFs may be on the horizon, analysts said.

"The market was waiting to see if the SEC would appeal against the Grayscale verdict," Gautam Chhugani, managing director at AllianceBernstein, wrote in a Monday note. "Now that SEC has chosen not to appeal, and actually, has been actively responding with edits/comments on the ETF applications, the probability of an approval by the Jan 10 due date, looks highly likely. "

Still, investors should remain cautious as "anything is possible with respect to this SEC," said David Tawil, president and co-founder at ProChain Capital.

Bitcoin's price swing on Monday led to liquidations of over $100 million of long and short positions, according to CoinGlass.

Once the agency gives a go-ahead to spot bitcoin ETFs, market volatility will be greatly reduced around this matter, Tawil said in a call.

-Frances Yue

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10-16-23 1303ET

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