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Introduction

The financial market has been keenly observing the developments surrounding the listing of Bitcoin exchange-traded funds (ETFs). The period between January 8 and January 10 has been identified as a critical window for the Securities and Exchange Commission (SEC) to make its ruling on a series of applications for the listing of spot Bitcoin ETFs.

SEC Review Process

The SEC is currently reviewing applications under a process known as 19b-4, which entails a request for a rule change by exchanges and issuers. The first deadline for this process is on January 10, concerning the application from Ark Invest, led by Cathy Wood, and 21Shares. The expectation is that the SEC will approve the rule changes, allowing the listing of spot Bitcoin ETFs. This approval would mark the first of two steps required for these ETFs to begin trading.

Applicant Overview

There are eleven filers seeking to launch Bitcoin ETFs. Among the notable applicants are Grayscale, with $26 billion in assets, and Blackrock. Fee structures vary significantly among the applicants, with some offering fee waivers down to 0%, and others like Bitwise and Van Eck offering expense ratios as low as 0.24% and 0.25%, respectively.

Capital Raising and Market Impact

Many of the applicants have already raised seed capital, though the exact amounts are not public. There is speculation of billions of dollars ready for investment upon approval of the ETFs. The SEC has mandated that these ETFs can only operate on a cash creation basis, meaning that the funds can only accept cash, which will then be used to purchase Bitcoin. This requirement is expected to lead to significant purchases of spot Bitcoin by market makers and Wall Street traders.

Timeline for Trading

If the SEC approves the 19b-4 applications, the next step would be for the issuers to have their S-1 prospectuses approved. Once both steps are complete, trading of the ETFs could begin within 24 hours. Rumors suggest that trading could start as soon as the week following approval or the latest, the subsequent week.

Bitcoin Price Considerations

Bitcoin has seen a 160% increase over the past twelve months, partly attributed to anticipation of the ETF approvals. It remains uncertain how much of this increase has already factored in the potential impact of the ETFs. While some of the run-up in Bitcoin's price may be due to investors anticipating the ETF approvals and the subsequent buying by asset managers, it is unlikely that the funds have already purchased Bitcoin. Thus, there may still be room for price movements once the ETFs begin trading.

via Bitbo.io

Probability of Approval

The consensus among market observers has shifted towards the expectation of SEC approval. However, there is still a non-zero chance of rejection, estimated by some at around 5%. The extensive time and effort invested by the SEC and issuers in the application process indicate a strong likelihood of approval.

Equal Treatment of Applications

The expectation is that if one Bitcoin ETF is approved, all eleven will be approved to maintain a level playing field. The SEC has mechanisms to ensure simultaneous launches, as seen with Ethereum futures ETFs.

Conclusion

The financial market awaits the SEC's decision on the listings of spot Bitcoin ETFs with anticipation. The approval is expected to have a considerable impact on the market, potentially leading to large-scale purchases of Bitcoin and further democratization of cryptocurrency investments through more accessible fee structures. The timeline for trading could see these ETFs on the market as early as this week, pending SEC approval of the necessary regulatory steps.