As expected by most crypto industry participants, the US Securities and Exchange Commission (SEC) has postponed its decision on whether to greenlight a spot Ethereum (ETH) exchange-traded fund (ETF), which had been proposed by Invesco and Galaxy Digital.
As part of a December 13, 2023 update, the US regulatory authority stated that it would be designating a longer time period regarding whether or not to approve a suggested rule change, which may enable the Cboe BZX Exchange to list/trade shares of the Invesco Galaxy Ethereum ETF.
The suggested spot cryptocurrency investment instrument is one of several others that are currently being reviewed by the SEC. To date, the US regulatory agency has never approved an ETF with direct exposure to Bitcoin (BTC) or other virtual currencies.
A December 13, 2023 update has stated:
“The 45th day after publication of the notice for this proposed rule change is December 23, 2023. The Commission is extending this 45-day time period. The Commission … designates February 6, 2024, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.”
Invesco and Galaxy Digital submitted applications for the spot Ethereum (ETH) ETF application back in September of this year. This is after it reactivated the application for a spot Bitcoin ETF in June 2023.
Industry professionals are now speculating that if the US SEC does actually end up approving a spot cryptocurrency ETF (Bitcoin or Ethereum-based), it may also decide to go ahead with various other approvals of funds from a number of other companies.
Currently, applications from companies on spot cryptocurrency-based ETFs have notably included big names such as BlackRock, Hashdex, VanEck, and Fidelity, among others.
Updates shared by the SEC in the past month indicated that certain fund managers could have held discussions with the regulator in order to go over the ETF offerings.
At this point, it has become clear that the anticipation of a crypto ETF approval by the US SEC is leading to a lot of speculation. Crypto traders and investors have become a lot more active and the price of Bitcoin, Ethereum, and other digital currencies have increased considerably. Importantly, the surge in crypto prices is not really being driven by any fundamental improvements of digital asset platforms. Instead, industry participants appear to be engaging in highly speculative trading and making quick investment decisions.
This type of crypto market activity is nothing new, though. At the time of the last bull market, which began after crypto-asset prices crashed following the COVID outbreak of February 2000, there was a great amount of speculative trading/investing as well. After Bitcoin (BTC) crashed to around $3,000 in early 2020, there was a large amount of capital that quickly entered the crypto ecosystem.
It was mainly fueled by Elon Musk and Tesla‘s announcement that they would be adding BTC to their balance sheets. As most crypto enthusiasts would know, this was also around the same time that Michael Saylor’s MicroStrategy began acquiring large amounts of BTC for their company balance sheet.
While MicroStrategy may be sitting on well over $1 billion in unrealized Bitcoin-related profits, it is still not a development that is based on any fundamental or sound investment strategy. It appears that business organizations, individuals, and investment firms are engaging in a lot of speculation. However, a Bitcoin ETF could still be a positive sign for the crypto space, because it would allow a large number of entities to enter this nascent industry (who are still waiting on the sidelines).
But for this ecosystem to grow in a more sustainable manner, we would need a more solid technological foundation/infrastructure along with many more real-world use cases for crypto/blockchain to emerge (sooner rather than later).