SEC - Page 36

Despite a recent hack of the United States Securities and Exchange Commission’s (SEC) social media account, the regulatory body is expected to proceed with its decision on approving spot Bitcoin exchange-traded funds (ETFs) this week.

On January 9th, the SEC’s Twitter account, known as the “X account,” was compromised, leading to an unauthorized post claiming that spot Bitcoin ETFs had been approved in the United States.

Although the message was removed approximately 20 minutes later, it caused significant disruption on social media and in the financial markets.

The SEC has reported that it is cooperating with law enforcement agencies to investigate the incident thoroughly.

Some observers have expressed concerns that this incident might be exploited as an excuse to delay the decision beyond the anticipated deadline of January 10th.

However, many consider this to be a remote possibility. Dennis Porter, CEO of Satoshi Action Fund, suggested that the SEC’s intentions would determine whether they might use this event to slow down the ETF approval process.

Porter remains optimistic that the SEC will grant approval to the spot Bitcoin ETF applicants on January 10th.

He stated that information from his contacts suggests that the ETF could be approved as early as this week or even as soon as tomorrow.

READ MORE: Bitcoin ETF Race Heats Up as Leading Players File Final Amendments with SEC

U.S. attorney and commercial litigator Joe Carlasare also believes that the SEC is likely to make a decision by the January 10th deadline.

He considers it extremely unlikely that the incident would lead the SEC to delay the approval or rejection of the ETFs.

However, Mati Greenspan, from cryptocurrency-focused finance firm Quantum Economics, raised the possibility that the SEC might attempt to use the false post as a pretext for a delay.

He mentioned that regulatory agencies have used various tactics to influence the markets in the past.

Bloomberg ETF analyst Eric Balchunas remains optimistic, anticipating the official approval of spot Bitcoin ETFs sometime between 4:00 pm and 5:00 pm Eastern Time on January 10th.

Digital asset lawyer Anthony Tu-Sekine of Seward and Kissel expressed skepticism that the incident would impact the likelihood of approvals at this late stage.

He found it puzzling that someone would engage in such actions when approval was already widely anticipated.

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The United States Securities and Exchange Commission (SEC) has issued a renewed warning to investors regarding the perils of FOMO (Fear of Missing Out) crypto investing.

This caution comes just days before the expected approval of spot Bitcoin exchange-traded funds (ETFs).

In a recent post on X, formerly known as Twitter, the SEC’s Office of Investor Education emphasized the risks associated with digital assets, encompassing meme stocks, cryptocurrencies, and nonfungible tokens (NFTs).

The “Say no go to FOMO” blog post initially surfaced on January 23, 2021, during a bullish period for both the crypto and equities markets, with Bitcoin, Ether, and numerous altcoins reaching record highs by November 2021.

A similar warning was reiterated around March 2022 when market temperatures were cooling.

Social media speculations have arisen, suggesting that this warning might foreshadow the SEC’s impending approval of one or more spot Bitcoin ETFs currently awaiting a decision before the looming January 10 deadline.

The SEC’s advisory cautioned against making investment decisions solely based on endorsements from celebrities and athletes.

It cited the temptation to follow popular figures promoting investment opportunities and the importance of conducting thorough due diligence.

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The regulatory body has previously imposed fines and penalties on celebrities for their involvement in endorsing specific cryptocurrencies.

An example includes Kim Kardashian, who, on October 3, 2023, agreed to pay a $1.26 million settlement to the SEC.

She was charged with failing to disclose a $250,000 payment she received for promoting a dubious token called Ethereum Max (EMAX) to her 360 million Instagram followers.

Furthermore, the report warned investors about the potential volatility inherent in assets influenced by trends and influencers.

While initially attractive, such investments can incur substantial losses as market dynamics evolve rapidly.

The cryptocurrency industry is closely monitoring developments in the Bitcoin ETF arena.

Senior Bloomberg ETF analyst Eric Balchunas anticipates that most applicants meeting the regulator’s prerequisites before December 29 will gain approval in the coming week.

This development adds an element of anticipation to the crypto market, as the potential approval of these ETFs could further legitimize and mainstream the cryptocurrency space.

However, the SEC’s latest warning serves as a reminder to investors to exercise caution and not succumb to FOMO-driven decisions.

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United States Securities and Exchange Commission (SEC) Chair Gary Gensler recently took to social media platform X, formerly known as Twitter, to address crypto investors and asset managers eagerly awaiting the verdict on their spot Bitcoin exchange-traded fund (ETF) applications.

In his January 8th post on X, Gensler urged crypto investors to exercise caution without explicitly mentioning the spot Bitcoin ETF.

He emphasized that asset managers might not be in compliance with federal securities laws when offering crypto investment products.

Gensler also highlighted the inherent risks and volatility associated with cryptocurrencies.

He warned about fraudulent activities targeting retail investors, such as bogus coin offerings, Ponzi and pyramid schemes, and outright theft where project promoters disappear with investors’ funds.

Gensler’s remarks, posted at 3:40 pm UTC, coincided with several spot Bitcoin ETF issuers submitting amended S-1 applications to the SEC.

This step represents one of the final stages in potentially gaining approval for these investment vehicles in the United States.

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The outcome remains uncertain at the time of writing, as multiple applications have been submitted by entities including Valkyrie, WisdomTree, BlackRock, VanEck, Invesco, Galaxy, Grayscale, ARK Invest, 21Shares, Fidelity, Bitwise, and Franklin Templeton.

Critics have voiced their discontent with Gensler over the SEC’s failure to approve a spot crypto ETF despite years of applications from various asset managers.

In contrast, Canadian regulators permitted firms to list spot Bitcoin ETFs on exchanges starting in 2021.

The S-1 filings on January 8th were anticipated, stemming from a deadline set by the SEC following a series of 19b-4 filings on January 5th.

While these actions indicate progress toward allowing crypto ETF listings on U.S. exchanges, they do not guarantee approval.

The commission still holds the option to deny applications, but any such denial would likely require different grounds than those previously used for other ETFs.

In August, a federal judge ordered the SEC to reconsider its rejection of Grayscale’s spot BTC ETF application, citing that the commission’s decision was “arbitrary and capricious.”

This ongoing debate highlights the complex and evolving regulatory landscape surrounding cryptocurrencies and ETFs in the United States.

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Numerous applicants vying for a coveted spot in the Bitcoin exchange-traded fund (ETF) arena have hastened to submit their final Form S-1 amendments to the United States Securities and Exchange Commission (SEC) on Monday, January 8, as anticipated.

Leading the charge, asset manager Valkyrie was among the initial companies to file its ultimate S-1 amendment just ahead of the January 10 deadline, widely anticipated as the approval date for the inaugural spot Bitcoin ETFs in the United States.

Following Valkyrie’s lead, a flurry of filings ensued from notable players in the financial industry, including WisdomTree, BlackRock, VanEck, Invesco, Galaxy, Grayscale (utilizing an S-3 filing), ARK Invest, 21Shares, Fidelity, Bitwise, and Franklin Templeton.

These new submissions herald the commencement of a potentially historic week for Bitcoin, as these hopeful issuers are anticipated to complete their Form S-1 amendments on this very day.

These amendments contain crucial information pertaining to fees and the identities of potential ETF market makers.

Several filers have significantly slashed trading fees for their prospective spot Bitcoin ETF products.

Notably, ARK and 21Shares, in their latest S-1 filing, announced their intention to waive the 0.25% fee for the first $1 billion in assets under management (AUM) for a six-month period post-listing.

BlackRock’s Bitcoin ETF, on the other hand, will impose a 0.3% fee following an initial 0.2% fee for the first 12 months or until reaching $5 billion in AUM.

Eric Balchunas, an ETF analyst at Bloomberg, believes that the ongoing fee competition among potential spot Bitcoin ETFs may not have a substantial impact on the market’s competition dynamics, stating that long-term investors primarily focus on regular fees.

READ MORE: Bitcoin Prepares for Volatility as U.S. Spot ETF Decision Looms in 2024

Aside from fees, some filers, including BlackRock, have disclosed details about seeding their spot Bitcoin ETFs.

BlackRock revealed that its trust acquired 227.9 BTC worth $10 million on January 5, 2024, using the proceeds from seed creation baskets.

As of the prospectus date, these 400,000 shares represent the total outstanding shares of the trust.

Meanwhile, ARK and 21Shares intend to purchase the initial seed creation baskets for $437,000 “on or about” January 8, with plans to acquire Bitcoin “at or prior” to listing shares on the Cboe BZX Exchange.

In contrast to S-1 filers, Grayscale Investments opted for an updated S-3 form registration statement, proposing a 1.5% spot Bitcoin ETF fee.

The firm also listed designated liquidity providers such as Jane Street, Virtu, Flow Traders, and Flowdesk, as well as authorized participants like Jane Street, Virtu, Macquarie, and ABN Amro.

At the time of reporting, 10 potential issuers have submitted updated S-1s, positioning them as the frontrunners to potentially become the first spot Bitcoin ETFs in the United States, as noted by Fox Business’ Eleanor Terrett.

Additionally, there is still a possibility that Hashdex could join this initial wave of ETFs if it submits a last-minute filing today.

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Tuttle Capital Management, an Exchange-traded fund (ETF) issuer, has taken a bold step by filing for six leveraged and inverse Bitcoin ETFs with the United States Securities and Exchange Commission (SEC).

These filings aim to provide investors with the opportunity to benefit from amplified returns in the world of Bitcoin, even before the approval of a traditional spot Bitcoin ETF.

On January 3rd, Tuttle submitted three N1-A forms to the SEC.

These forms are typically used by investment companies to create new open-ended mutual funds.

Bloomberg Intelligence ETF analyst Henry Jim shared the news on X (formerly Twitter) and revealed an effective date of March 18, 2024.

This move showcases Tuttle’s eagerness to capitalize on the growing interest in cryptocurrency investments.

Fellow Bloomberg ETF analyst James Seyffart echoed this sentiment by highlighting Tuttle’s proactive approach, as they have already filed for six leveraged Bitcoin ETFs, despite the absence of an approved spot ETF.

This demonstrates their commitment to innovation in the ETF space.

READ MORE: Spot Bitcoin ETF Transparency Becomes Key Competitive Factor in Race for Approval

The six proposed Bitcoin ETFs include T-REX 1.5X, 1.75X, and 2X Long Spot Bitcoin Daily Target ETFs, along with T-REX 1.5X, 1.75X, and 2X Inverse Spot Bitcoin Daily Target ETFs.

These funds aim to deliver daily results with leveraged or inverse strategies, offering potential returns of up to 150% (for the 1.5X product) and 200% (for the 2X product).

Tuttle plans to initially use BlackRock’s prospective iShares spot Bitcoin ETF as the reference asset for swap agreements, though they may consider changing this reference asset in the future.

It’s important to note that these ETFs come with higher risk compared to non-leveraged alternatives because they magnify the performance of the underlying security, which in this case is Bitcoin, known for its price volatility.

Tuttle has not yet disclosed the proposed ticker symbols or set management fees for these ETFs. Further inquiries have been made to Tuttle for additional information.

Currently, Tuttle manages seven listed ETFs with a total of $96 million in assets, as per data from Stock Analysis. Among their existing products are the T-REX 2X Long Tesla Daily Target ETF (TSLT) and the T-REX 2X Long NVIDIA Daily Target ETF (NVDX).

The addition of leveraged and inverse Bitcoin ETFs to their portfolio reflects their commitment to diversifying investment options and addressing the evolving needs of investors in the cryptocurrency space.

Bitcoin’s sudden drop of $4,000 within hours is not solely due to panic surrounding the United States regulators’ potential rejection of a spot exchange-traded fund (ETF), according to prominent commentators.

This flash crash led to liquidations of over half a billion dollars in cryptocurrency positions.

The decline in Bitcoin’s price, nearly 9% of its value, coincided with the cryptocurrency’s 15th anniversary on January 3, as reported by Cointelegraph Markets Pro and TradingView.

CoinGlass, a statistics resource, reported long liquidations amounting to $514 million on the same day.

Matrixport, a crypto financial services platform, released a report asserting that the U.S. Securities and Exchange Commission (SEC) is likely to reject the spot ETF.

The report claimed that an ETF approval would catalyze crypto adoption, but the SEC chairman, Gensler, expressed the need for stricter compliance in the industry, implying that there is no political incentive to legitimize Bitcoin as an alternative store of value through a spot ETF.

READ MORE: Global Bitcoin ATM Count Falls by 11.1% in 2023, Breaking 10-Year Growth Streak

However, the report lacked concrete evidence to support its claim, and the official window for the SEC’s decision on the ETF is set from January 4 to January 10.

Some market experts, including trader and podcast host Scott Melker, questioned the rationale behind Matrixport’s perspective.

Others argued that the liquidations observed during the price drop were typical of Bitcoin’s behavior in a bull market.

Joe Carlasare, a crypto-focused litigator, dismissed the idea that the ETF report triggered the sell-off, attributing it instead to the market being overbought and in need of a liquidity squeeze.

Matrixport, anticipating a possible rejection by the SEC, predicted only a modest further decline in Bitcoin’s price.

If the SEC denies approval, the report anticipates cascading liquidations, potentially causing a rapid 20% decrease in Bitcoin’s value, bringing it back to the $36,000-$38,000 range.

As previously reported by Cointelegraph, analysts had already identified the mid-to-low $30,000 range as a likely support level for Bitcoin’s price.

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The possibility of a Bitcoin exchange-traded fund (ETF) facing rejection by the Securities and Exchange Commission (SEC) this month is slim, according to Bloomberg ETF analyst Eric Balchunas.

While the outcome remains uncertain, Balchunas suggests that any delay or rejection is more likely to be due to the SEC’s need for additional time rather than an outright denial.

Balchunas, along with fellow ETF analyst James Seyffart, maintains a 90% probability of approval by January 10 but has refrained from raising the odds further due to this lingering concern.

He emphasizes that the 10% chance of rejection encompasses various scenarios.

However, Balchunas believes that the extensive time and effort invested by both the SEC and Bitcoin ETF issuers make an outright rejection at the last moment highly unlikely.

He characterizes such a rejection as the “rug pull of the decade,” considering the significant effort expended, particularly during the holiday season.

Vetle Lunde, an analyst from crypto research firm K33 Research, shares a similar outlook, estimating the chances of an ETF rejection at just 5% in a January 2 market report.

READ MORE: Data Suggests Limited Impact on Bitcoin Prices Despite SEC ETF Approval Speculation

Should the SEC issue an outright denial, Balchunas speculates that fund issuers might take legal action against the regulator, following the example of crypto asset manager Grayscale.

He believes that the substantial financial investments and efforts made thus far would discourage parties from giving up easily.

Public comments addressing the SEC’s request for feedback on the ETF filings continue to be submitted, with two recent submissions on January 2 advocating for an outright rejection.

One letter argued that Bitcoin’s decentralized nature and its potential to bypass traditional financial systems could make it attractive to authoritarian regimes seeking to evade sanctions and exert control over their citizens.

In summary, while the possibility of a Bitcoin ETF rejection remains, analysts like Eric Balchunas and Vetle Lunde view it as a low probability event, with the SEC more likely to request additional time for review rather than outright denial.

The significant investments and efforts put into this endeavor make an outright rejection less plausible, and legal action might follow if such a scenario were to occur.

Public feedback on the matter continues to be submitted to the SEC, reflecting ongoing discussions within the crypto community.

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