Grayscale’s Bid for a Spot Bitcoin ETF Gains Momentum Amidst Talks with Banking Giants

Last week, Grayscale Investments, the world’s largest cryptocurrency asset manager, filed an amendment to its S-3 application with the U.S. Securities and Exchange Commission (SEC) for a spot Bitcoin exchange-traded fund (ETF). While Grayscale did not disclose any authorized participants in its filing, Bloomberg reported that the firm is in talks with banking giants such as JPMorgan and Goldman Sachs to act as such.

Authorized participants play a crucial role in managing an ETF, as they are responsible for creating and redeeming fund shares to ensure the ETF’s price tracks the value of the underlying assets. Additionally, they provide essential liquidity to the fund.

JPMorgan has already been named an authorized participant in spot Bitcoin ETF applications from other issuers like BlackRock and Invesco Galaxy.

Grayscale is diligently working for ETF approval

On January 4, Grayscale, the largest Bitcoin fund manager globally, submitted Form 8-A to the SEC, allowing for registration to trade on a stock exchange once the product is approved. This submission comes a day after Fidelity filed its form, just a week before the SEC is expected to make the highly anticipated announcement regarding Bitcoin ETFs.

Grayscale has sought SEC approval for years to convert its popular Bitcoin Trust (GBTC) into a spot ETF, though success has eluded them so far. However, this time, the outlook is very different, with many analysts predicting that the SEC will finally give in and approve the first Bitcoin spot ETF in the United States.

Currently, 14 fund managers are looking to launch spot Bitcoin ETFs in the U.S. market. While several Bloomberg Intelligence analysts, such as Eric Balchunas, forecast high chances of SEC approval before January 10, others suggest the regulator may reject all applications again.

Cryptocurrency market stirs amid spot ETF speculation

Speculation regarding the SEC’s potential approval of a spot Bitcoin ETF has peaked this week, fueled by a negative report from Matrixport titled: “Why the SEC Will Again Reject Bitcoin Spot ETFs.”

Matrixport’s report led to a significant drop of almost 10% in the price of Bitcoin, dragging most cryptocurrencies down with double-digit losses.

According to Matrixport, despite the SEC’s ongoing meetings with applicants, they believe “all applications fail to meet a critical requirement that must be fulfilled before the SEC approves” the first ETF, emphasizing that “this could be met by the second quarter of 2024, but we expect the SEC to reject all proposals in January.”

Although the SEC can reject all applications at its discretion, some analysts reasonably suggest that the regulator wouldn’t go through such trouble if approval were not imminent.