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SEC Delays Response to Bitcoin ETF Applications, Leaving Investors in Limbo

The U.S. Securities and Exchange Commission (SEC) is yet to respond to spot bitcoin exchange-traded fund (ETF) applications, with a final deadline for at least one application approaching on Wednesday. The SEC must decide whether to approve or reject Ark 21 Shares’ application by Jan. 10, and it may approve all of the final applications it is comfortable with by that date. Bitcoin has been consolidating after reaching a 21-month high of almost $46,000 as it awaits clarity on the decision. On Monday, bitcoin gained around 2% to reach $45,000 after dropping to $43,400 over the weekend. If the SEC does not approve spot ETFs this week, LMAX Digital said there could be a significant decline in price but noted, “we also expect any pullbacks to be exceptionally well supported above $30k in 2024.” However, if there is an approval, LMAX said it will translate to an immediate rally to the tune of 10%-15%.

The odds of a spot bitcoin ETF being approved in the U.S. have risen to more than 90%, according to two influential analysts at Bloomberg. However, crypto market participants at betting platform Polymarket have become more pessimistic, trimming the odds to 85%. Referring to the likelihood of the SEC rejecting proposals after Friday’s flurry of updated filings, Bloomberg ETF analyst Eric Balchunas said in a Saturday post: “I probably go with 5% at this point. But you gotta leave a little window open for these things.” He previously tipped the odds at 90% in November, saying that updated forms at the time indicated providers were moving in the right direction.

ARK Invest sold a further $20.6 million worth of Coinbase (COIN) shares on Friday across three of its ETFs. Cathie Wood’s investment firm offloaded a total of 133,823 COIN shares, which closed last week at $153.98. ARK Invest has a target of no individual stock surpassing 10% weighting of an ETF’s value. COIN more than doubled in price in the last three months of 2023, leading to consistent sales of the crypto exchange’s shares by ARK. Its largest weighting of Coinbase stock is in its Innovation ETF (ARKK), which holds over $850 million worth of COIN. The latest offload brings its weighting down to 10.04%, suggesting that the sales from ARKK could be coming to an end, unless there is another surge in Coinbase’s share price.

The chart of the day shows changes in the implied volatility curve derived from bitcoin options expiring on Feb. 23. Implied volatility refers to the market’s expectations for price turbulence over a specific period. The curve has steadily shifted higher in recent weeks, indicating that traders are preparing for increased price turbulence ahead of the expected U.S. SEC approval of one or more spot ETFs by Jan. 10.

Source: Amberdata – Omkar Godbole

Martin Reid

Martin Reid

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