More than 10 years of long journey: Bitcoin spot ETF’s key turning point and historic moment

Author: 0xjs@金财经

After more than ten years of long journey, the Bitcoin spot ETF was really approved by the US SEC on January 10, 2024.

Is it destiny or just a coincidence? On the same day 15 years ago, Bitcoin pioneer Hal Finney posted the first tweet about Bitcoin, “Running bitcoin.”

As early as 2013 , the Winklevoss twin brothers began to apply for a Bitcoin spot ETF to the U.S. SEC. However, in the subsequent encryption cycles of more than ten years, many traditional investment institutions such as VanEck, BitWise, Grayscale, and Ark Invest continued to impact the Bitcoin spot ETF. Applications, and even the U.S. SEC approved the ProShares Bitcoin futures ETF in October 2021, but the U.S. SEC has always rejected all applications for Bitcoin spot ETFs.

Until June 2023, traditional financial giants such as BlackRock and Fidelity joined the Bitcoin spot ETF application, greatly accelerating the historical process. On January 10, 2024, the Bitcoin spot ETF achieved a historic breakthrough and was finally approved by the U.S. SEC.

In more than 10 years, Bitcoin has gone from upholding ideology to resist traditional finance to taking over the traditional financial system. In January 2024 On March 10th, Bitcoin witnessed a historic moment and entered a new chapter.

Bitcoin spot ETF application: 10 years of long journey

The application for Bitcoin spot ETF is a long journey that lasted more than 10 years and spanned multiple rounds of encryption. cycle.

2013: The beginning of Bitcoin spot ETF

Winklevoss Bitcoin Trust Fund: As early as 10 years ago in July 2013, the Winklevoss twin brothers submitted the U.S. Bitcoin spot ETF for the first time  ;The application for the "Winklevoss Bitcoin Trust Fund" was subsequently rejected by the US SEC.

After the crypto bull market in 2017, Bitcoin futures were listed on mainstream exchanges in the United States. As the value of Bitcoin increased, With the encryption experience gained by American financial institutions, financial institutions have successively begun to target Bitcoin ETFs.

Grayscale Bitcoin Trust GBTC: GBTC began raising funds as early as 2013, submitted an ETF application to the U.S. SEC in 2016, and spent most of 2017 with the U.S. The SEC engaged in dialogue but later chose to withdraw the application.

The Winklevoss brothers submitted a Bitcoin spot ETF application again in March 2017, but it was rejected by the SEC again in July of the same year. The reason for the US SEC's rejection was that the lack of regulation of the Bitcoin market raised "concerns about potential fraudulent or manipulative acts and practices."

VanEck Bitcoin Trust: In August 2018, asset management company VanEck and District Blockchain technology company SolidX collaborated to submit an application for the VanEck Bitcoin Trust Bitcoin Spot ETF, which was rejected by the SEC in September 2019.

Bitwise Bitcoin ETP Trust: In January 2019, Bitwise Asset Management submitted an application for a Bitcoin spot ETF. However, the application was withdrawn in January 2020 due to SEC concerns.

Kryptoin Bitcoin Trust: Kryptoin, headquartered in Delaware, tried to apply for a Bitcoin spot ETF for the first time in October 2019, and planned to be listed on NYSE Arca. It was rejected by the US SEC at the end of the year.

2021: Bitcoin spot ETF is gradually gaining institutional recognition

The crypto bull market in 2021 will be followed by As Tesla and many other U.S. listed companies buy Bitcoin or accept Bitcoin payments, Bitcoin as an asset has gained more recognition from people in the U.S. financial industry, the world's largest financial market. There has been a small upsurge in applications for Bitcoin spot ETFs.

The first is the Purpose Bitcoin ETF listed on the Toronto Stock Exchange. Purpose Investments launched the first Bitcoin spot ETF product Purpose Bitcoin ETF in February 2021.

Valkyrie Bitcoin Fund: Asset management company Valkyrie submitted its first Bitcoin ETF application in January 2021. It was rejected by the US SEC at the end of 2021. But in early 2022, Valkyrie’s Bitcoin Mining ETF successfully obtained SEC approval. The Bitcoin Mining ETF includes Bitcoin mining such as Argo Blockchain, Bitfarms, Cleanspark, Hive Blockchain and Stronghold Digital Mining. company.

WisdomTree Bitcoin Trust: WisdomTree, a New York-based asset management company, submitted an S-1 document to the SEC in March 2021, proposing to  Cboe BZX Exchange listed WisdomTree Bitcoin Trust with the stock code BTCW. The SEC rejected WisdomTree’s application at the end of 2021. WisdomTree launched a Bitcoin ETF on the Swiss SIX Exchange in 2019.

Ark21Shares ETF: In June 2021, the investment company Ark Invest, led by Wall Street star investor Cathie Wood , entered into a partnership with the Swiss ETF provider  21Shares AG cooperates and submitted an application for Ark21Shares ETF, which is planned to be traded on Cboe's BZX exchange with the stock code of ARKB. However, its application was rejected in early 2022. Ark Invest immediately reapplied and was rejected again in January 2023. Ark Invest submitted its document application again on April 25, 2023.

Bitwise Bitcoin ETP Trust: Bitwise company launched another application in October 2021, but was rejected by the US SEC in November. The U.S. SEC reasoned that Cboe BZX Exchange "has not determined that other means are adequate to prevent fraudulent and manipulative acts and practices." ;Digital  and Invesco  jointly submitted a Bitcoin ETF named Invesco Galaxy Bitcoin ETF on 9 May 22nd, 2021. At the end of 2021, it was hit again to rejection.

Kryptoin Bitcoin Trust: In April 2021, Kryptoin tried to launch a Bitcoin ETF for the second time. The approval was also repeatedly delayed by the US SEC, and the application was rejected at the end of 2021.  

Global X Bitcoin Trust: Global X Digital Assets submitted an application to the SEC  Coin Spot ETF Global X Bitcoin Trust is planned to be traded on the Cboe BZX exchange. The SEC has repeatedly postponed extension approval, and the application was rejected by the SEC in March 2022.

Grayscale Bitcoin Trust GBTC: In January 2020, Grayscale became an SEC reporting company. On November 29, 2021, Grayscale submitted an application to convert its GBTC into ETF. 2On June 29, 2022, the U.S. SEC rejected Grayscale Bitcoin Trust GBTC's application to convert it into an ETF. The next day Grayscale filed a The D.C. Circuit Court of Appeals filed a petition for review. The two sides started a tug of war for more than a year until Grayscale won the lawsuit against the US SEC in August 2023.

2023: A new wave of Bitcoin spot ETFs

First, Ark 21Shares launched its latest application in April 2023, and then in June 2023 The entry of BlackRock and Grayscale’s victory against the US SEC ushered in a turning point for Bitcoin spot ETFs and witnessed a new wave of Bitcoin spot ETFs.

Turning point: BlackRock’s entry, Grayscale’s victory over SEC case and defeat of Binance

In the history of Bitcoin spot ETF applications, the turning point will be three landmark events in the second half of 2023 event.

1. Asset management giant BlackRock has changed its attitude towards Bitcoin. BlackRock CEO Larry Fink changed his previous negative attitude towards Bitcoin after entering 2023, admitting that BTC is a global asset that can "transcend any currency". In June 2023, BlackRock joined the Bitcoin spot ETF application battle. On June 15, BlackRock submitted an S-1 registration statement to the U.S. SEC, officially launching its Bitcoin spot ETF iShares application for Bitcoin Trust. BlackRock’s spot Bitcoin ETF filing is notable because BlackRock has a near-perfect track record of getting ETF approvals, having been successful 255 out of 256 times.

Except Grayscale and Ark 21Shares, After BlackRock applied for a Bitcoin spot ETF , Bitwise VanEck, WisdomTree, Invesco&Galaxy, Fidelity, Valkyrie, Global 

Except Grayscale and Ark 21Shares, the other 11 Bitcoin spot ETFs will apply after June 2023

2. Grayscale achieved a major victory in its lawsuit against the US SEC. After the U.S. SEC repeatedly refused to convert Grayscale Bitcoin Trust into a Bitcoin ETF, Grayscale chose to sue the U.S. SEC. On August 29, 2023, the U.S. Court of Appeals for the Washington Circuit approved Grayscale’s petition. The court believed that the U.S. SEC adopted double standards for Bitcoin spot and derivatives, but was unable to explain the necessity of adopting such double standards. Therefore, the court required  SEC Treated Grayscale’s spot ETF application equally, requiring a review of the U.S. SEC’s rejection of its application to convert GBTC into a spot Bitcoin ETF 

Although in the second half of 2023, the U.S. SEC still chose to postpone its decision on the spot Bitcoin ETF multiple times on the deadline. However, because of the above two reasons, the market generally expects that the Bitcoin spot ETF will eventually be approved.

Therefore, in the second half of 2023, the encryption market repeatedly speculated on the news of Bitcoin spot ETF.

A typical example is the Cointelegraph fake news incident.

Cointelegraph fake news incident

On October 16, 2023, Cointelegraph published the fake news "U.S. SEC approves Bei Ryder’s iShare Bitcoin Spot ETF” and the news that multiple ETFs have registered with the DTCC to obtain stock codes, triggered the Bitcoin market to jump from US$27,000 to US$35,000.

Although the news was false at the time, facts have proven that the market believed the news in advance.

3. The US government surrenders Binance, the largest exchange in the crypto industry. On November 21, 2023, Binance reached a settlement with the U.S. Department of Justice, Treasury, CFTC and other departments, pleading guilty and paying a fine of more than $4 billion. The U.S. government can access Binance data and dispatch supervisors. Although there is no U.S. SEC among these departments, this represents, to a certain extent, partial regulation of the Bitcoin spot market by the U.S. government. The main reason why the U.S. SEC has repeatedly rejected Bitcoin spot ETFs is the lack of supervision and market manipulation in the Bitcoin spot market. After Binance was supervised by the U.S. government, Perhaps it can partially eliminate the concerns of the US SEC. At the same time, if the US SEC approves a Bitcoin spot ETF, it will even allow Wall Street to control the pricing power of the Bitcoin spot market.

Why has the SEC not approved Bitcoin spot ETFs before?

Compared to The launch of Bitcoin futures ETF and the approval process of Bitcoin spot ETF can be described as protracted.

After ProShares’ first Bitcoin futures ETF  was approved in October 2021, there were 5 Bitcoin futures ETF  within the following 1 year. are allowed to be listed and traded. But all applications for Bitcoin spot ETFs were rejected.

According to the SEC’s previous rejection of multiple Bitcoin spot ETFs, the main reasons for the rejection are:

1. Spot cryptocurrencies are mainly traded in unregulated transactions Trading on the platform is difficult to supervise, and the spot market has long had market manipulation problems.

This is also the main argument used by the US SEC to repeatedly reject Bitcoin spot ETFs. Bitcoin futures ETFs have fewer problems in this regard. First, the assets tracked by the Bitcoin Futures ETF come from CME Bitcoin Futures. CME is regulated by the CFTC and has higher compliance. Secondly, the secondary market for the underlying assets of Bitcoin futures ETFs is more mature. CME  is the largest derivatives exchange in the United States and even the world. Compared with crypto CEX  such as Binance, OKX, and Coinbase, CME  has established complete pre-market, after-market, block, market making, clearing, settlement and other transactions. system. According to Bitwise's paper, CME's Bitcoin futures market is ahead of the spot market and is the main source of price discovery in the global Bitcoin market.

As for the Bitcoin spot market, it has been greatly improved. In November 2023, Binance, the world's largest exchange, and its CEO pleaded guilty to the US government. The US government has been able to obtain Binance data and supervise Binance.

2. The investment funds of BTC spot ETF include pensions, retirement funds, etc., and the crypto market is highly volatile, which may cause investors to suffer huge losses.

3. Finally, the regulatory bills are different. Bitcoin futures ETFs are subject to the "Investment Company Act of 1940", which imposes strict requirements on the governance structure, information disclosure, liquidity and valuation, leverage, etc. of the fund issuer. However, this goes against the original design intention and operating mechanism of the ETF. Therefore, the listing and trading of Bitcoin futures ETF can apply for exemption regulations without submitting proof. The Bitcoin spot ETF is governed by the Securities Exchange Act of 1934. According to Section 6(b)(1) of the Act, the exchange needs to submit a detailed description of form 19b-4  ETF How the underlying market prevents fraud and resists price manipulation to protect investor interests.

Bitcoin spot ETF application process and operating mechanism

According to the Bitcoin spot ETF application process on the SEC website, a 19b-4 document was published in the Federal Register  (19b-4  ;Federal register), the SEC began to review Bitcoin spot ETFs.

The U.S. SEC may approve or reject the Bitcoin Spot ETF application at any time during the review period, or there may be three deadlines to delay whether to accept or reject its application.

These three deadlines (First, Second, Third Deadline) are three public responses from the US SEC, with intervals of 45 days, 45 days, and 90 days respectively.

Before issuing a final decision of approval or rejection (Final Deadline), the U.S. SEC’s maximum resolution time can be up to 240 days.

As for the detailed operating mechanism of Bitcoin spot ETF, please refer to the previous article of Golden Finance "Here is a copy of Bitcoin Guide to the operation mechanism of currency spot ETF"

History shines into the future: Bitcoin ETF Vs. Gold ETF

People in the encryption industry attach great importance to Bitcoin spot ETFs. One of the main reasons is that they hope that the launch of Bitcoin spot ETFs will allow Bitcoin to repeat the trend of gold ETFs that year.

Bitcoin has always been called "digital gold". There are indeed many similarities between Bitcoin ETFs and gold ETFs. Holding physical gold is difficult for many investors, and custody of crypto assets is a challenge for many investors today. In addition, the convenience, low cost and accessibility of issuers will attract new investors to the gold or Bitcoin market who would not have participated before.

The first gold ETF was first launched in Australia in 2003. In 2004, Gold ETF Street Tracks Gold Trust (GLD) entered the U.S. capital market and was listed on the New York Stock Exchange. Subsequently, gold experienced a seven-year bull market.

Gold prices over the past 30 years Source:goldprice.org

And how much will the adoption of the Bitcoin spot ETF attract? What about funds entering the Bitcoin market? The Galaxy report estimates that US$14 billion will flow into the Bitcoin market in the first year after the launch of the ETF, and its size will increase in the second year. to $27 billion, rising to $39 billion in the third year after launch.

Conclusion

It is no exaggeration to say that the more than 10 years of application process for Bitcoin spot ETF is also the transformation of Bitcoin from holding high ideology to resist traditional finance, to passing through financial institutions. The process of integrating into the traditional financial system.

Whether Bitcoin deviates from its original intention or Bitcoin enters mainstream society, No matter how you think about it, now Bitcoin can indeed Reached more users.

What Bitcoin will bring to people ultimately depends on how people view Bitcoin.

Lord Acton once said, "Without mental preparation in advance, a person cannot suddenly gain freedom."

The same is true for Bitcoin. I agree with the concept behind Bitcoin. No matter how many Bitcoin users there are and no matter how valuable Bitcoin is, it may only go further and further away.