By
Godfrey Benjamin
May 10th, 2024
The anticipation of this approval has contributed to the recent rally in Bitcoin prices, currently hovering around $45,000.
As the January 10 deadline for a spot Bitcoin (BTC) Exchange-Traded Fund (ETF) approval by the US Securities and Exchange Commission (SEC) looms, Investment bank TD Cowen suggests that this approval is not just a financial decision but a “political necessity” for the markets regulator.
TD Cowen’s Optimism on Spot Bitcoin ETF Approval
TD Cowen’s Washington Research Group, led by Jaret Seiberg, highlighted that the SEC’s approval is seen as an opportunity for the agency to solidify its position as a regulator in the crypto space before Congress considers more extensive crypto legislation.
“We also believe the agency does not want to lose a legal challenge to its refusal to approve bitcoin ETFs,” the TD Cowen Researchers said.
TD Cowen emphasizes the political necessity for the SEC to approve spot bitcoin ETFs by the January 10 deadline. This deadline corresponds to the decision on the application from Cathie Wood’s ARK Investment and 21Shares, the first group to file a spot Bitcoin ETF application. With more than a dozen firms, including industry giants like BlackRock Inc (NYSE: BLK) and Fidelity Investments, awaiting approval, the SEC’s decision is poised to shape the future of institutional investment in the crypto space.
The anticipation of this approval has contributed to the recent rally in Bitcoin prices, currently hovering around $45,000. However, analysts caution against a potential “sell-the-news” scenario, with a 75% probability of short-term market participants engaging in profit-taking following the approval.
Vetle Lunde, an analyst at K33 Research, highlights a 5% probability of the filings being denied. Lunde suggests that a sell-the-news event could become a self-fulfilling prophecy, especially considering the exposure of traders ahead of the SEC’s determination.
A Focus on Crypto Regulation
Beyond the imminent decision on spot bitcoin ETFs, attention in the crypto space has also been on two Republican-led bills. One bill aims to regulate stablecoins on the federal level, while the other takes a comprehensive approach to the crypto market structure. Both bills passed the House Financial Services Committee in July, led by Chair Patrick T. McHenry, R-N.C but their progression to the Senate Banking Committee faces challenges.
TD Cowen suggests that there might be an opportunity for a comprehensive crypto market structure bill during the ‘lame duck’ period after an election. This period, between the election and the inauguration of a new government, could provide a window for negotiations. TD Cowen notes that SEC leadership on investor protections will be crucial in garnering support from the Senate and White House.
If the broader crypto market structure legislation faces challenges, TD Cowen sees the stablecoin bill as a fallback option. Despite being viewed as a less political lift, hurdles remain substantial, and success will depend on Republican willingness to compromise with Democratic demands.