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Former chairman of the US Securities and Exchange Commission (SEC) Jay Clayton just called for the approval of a spot Bitcoin Exchange Traded Fund (ETF) in an appearance on CNBC TV.
Initially, he conceded that, back when he was chair of the SEC, he had been skeptical of the Bitcoin trading markets.
However, he noted that the landscape for the Bitcoin market has “definitely” changed, noting large retail participation in the market around the globe, and the fact that “people want access to it”.
“Now we have very credible financial institutions with fiduciary duties to their customers who are saying “we want to deliver this product (a spot Bitcoin ETF)” and can do so consistent with those (fiduciary) obligations”, Clayton continued.
Moreover, Clayton pointed to the fact that there are already Bitcoin futures ETFs trading in the US, but they are an inefficient product.
“My assessment, looking at all of that, is let’s get some public comment and then let’s move on and have a spot Bitcoin ETF,” he concluded.
His remarks come a few days after the SEC postponed a decision on Ark Invest’s spot Bitcoin ETF application, instead calling for a period of public comment.
That postponement wasn’t a surprise.
Many major crypto industry players, such as Ark Invest CEO Cathie Wood herself, expect the SEC to approve multiple spot Bitcoin ETFs simultaneously rather than one by one.
And the SEC appears to be wanting to buy time after a wave of spot Bitcoin ETF applications came in from major financial institutions like BlackRock, Vanguard and Fidelity in June.
Spot Bitcoin ETF Approval to Trigger Next Rally
The wave of new spot Bitcoin ETF applications from, as Clayton puts it, credible financial institutions back in June triggered a rapid rally from multi-month lows in the $25,000s to fresh yearly highs near $32,000.
That rally has since eased, despite most analysts and investors remaining optimistic about the prospect that these applications get approved.
The market appears to have entered a sort of wait-and-see mode, with traders also monitoring themes such as the US regulatory backdrop (the SEC continues its regulation by enforcement rampage as Congress struggles to get legislation through, even on stablecoins) and the Fed’s interest rate outlook (interest rates appears to have now peaked, with cuts to come in 2024).
Bitcoin has been stuck in a $28,000-$30,000 range for a few weeks now.
Research houses like Matrixport and Bernstein are predicting spot Bitcoin ETF approvals will be the trigger for another leg higher in the Bitcoin market.
Both note that a spot Bitcoin ETF would open the door to a flood of institutional funds that have been waiting on the sidelines for a product to arise that gives them easy access to the crypto market.
By investing in a spot Bitcoin ETF, a fund manager can give their clients direct access to Bitcoin without needing to deal with all the tricky intricacies of web3, like dealing with exchanges and web3 wallets.
But spot Bitcoin ETF approval should also give Bitcoin a PR push, they note.
As per Bernstein, if the ETF applications get approval, cryptocurrency will benefit from a “strong brand marketing push by leading global asset managers,” and a “distribution push from retail brokers and financial advisors”.
According to Matrixport, ETF providers would spend “considerable marketing expenses to draw in retail and institutional capital”.
Retest of $25K First?
While there is a lot to be optimistic about, Bitcoin is looking vulnerable to a short-term setback, mainly as a result of potential technical selling.
Bitcoin looks to be on the verge of breaking to the south of its 2023 uptrend.
A break below here would probably trigger a drop back towards short-term support in the mid-$28,000s.
Potentially, profit-taking in wake of this year’s strong rally could push prices under the 200-Day Moving Average (DMA) at $27,200 and towards the sub-$25,000 June lows.
However, given the outlook for probable spot ETF approvals in late 2023/early 2024, Fed rate cuts in 2024, (hopefully) more US regulatory clarity and the 2024 Bitcoin halving (traditionally a bullish event), any dips to the mid-$20,000s will likely be viewed by many as a wonderful dip buying opportunity.
Any such setback in the coming weeks and months would likely be short-lived.