SEC Leak Unveils Unexpected $17.7 Trillion Bitcoin ETF Development, Triggering Crypto Price Rally

Bitcoin has experienced a period of consolidation following a robust rally over the past two months, marked by Coinbase unveiling a substantial multi-trillion dollar opportunity this week.

Over the last 12 months, the bitcoin price has more than doubled, thrusting bitcoin and cryptocurrencies back into the spotlight. This resurgence persists despite concerns that the U.S. government and BlackRock’s potential bitcoin spot exchange-traded fund (ETF) could pose a threat to bitcoin’s viability.

Presently, with the crypto community closely monitoring a potential breakthrough with BlackRock, a prominent ETF analyst asserts that leaked conversations from the U.S. Securities and Exchange Commission (SEC) indicate ongoing negotiations with crypto exchanges regarding ETF applications.

Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, shared insights on Twitter, stating, “Hearing chatter SEC’s Trading and Markets engaged with exchanges this week on spot bitcoin ETF 19b-4s, is advising them they’d like the ETFs to do cash creates (vs in-kind), and has asked them to get in amendments in next couple weeks.” Balchunas emphasizes that while this development was anticipated, it remains a positive sign.

The distinction between cash and in-kind refers to the method of redemptions, with in-kind funds providing investors leaving the fund with a payment other than cash.

Providing an update on the situation, James Seyffart, another Bloomberg Intelligence ETF analyst, commented on Balchunas’ post, affirming that it does not alter their 90% likelihood prediction of a bitcoin spot ETF gaining approval this year. Seyffart notes that while it may not be groundbreaking, progress is evident and things are advancing.

However, Gabor Gurbacs, founder of the rewards app PointsVille and an advisor to investment manager VanEck, expressed caution, interpreting the SEC’s preference for cash bitcoin spot ETFs as a “sign that regulators don’t [or are]unwilling to understand and accept the best aspects of ETFs and bitcoin. In-kind creates are simply much more efficient. Anyone managing an ETF knows this,” as posted on Twitter.

Balchunas’ disclosure spurred a rapid surge in the bitcoin price, escalating from $36,000 per bitcoin to nearly $37,000. This reaction suggests that traders are responding to indications that the SEC may be on the verge of approving bitcoin spot ETF applications from prominent Wall Street entities managing a combined $17.7 trillion, as a closely-monitored “window” comes to a close.

In June, the bitcoin price experienced a significant boost after BlackRock, the world’s largest asset manager overseeing approximately $10 trillion for clients, submitted an application to create a bitcoin spot ETF with Coinbase serving as its custodian.