Less than 48 hours of "bull market": SEC postpones Bitcoin ETF and the market falls

On August 30, Grayscale won the lawsuit against the SEC. The market surged, and Bitcoin once broke through $28,000. With Grayscale's judicial victory, people have high hopes for "the United States will soon approve a spot Bitcoin ETF", and this "ambition" of the crypto world seems to be within reach. But within 48 hours of the good news of Grayscale's victory, something unexpected happened.

The U.S. Securities and Exchange Commission said today that they need to postpone the approval of Bitcoin spot ETFs, at least three spot ETFs proposed by WisdomTree, Valkyrie, and Invesco. The decision on the product will be postponed until at least mid-October.

Tomorrow and tomorrow, how many tomorrows there are

This is not the first time the SEC has delayed a Bitcoin ETF in recent times.

In mid-June, BlackRock submitted an application for a Bitcoin spot ETF, sparking a clear bullish sentiment in the cryptocurrency market. In late July, the SEC began reviewing whether to approve or reject six Bitcoin spot ETFs, including BlackRock’s. (Odaily Planet Daily Note: Specifically including BlackRock iShares Bitcoin Trust, Fidelity Wise Origin Bitcoin Trust, WisdomTree Bitcoin Trust, VanEck Bitcoin Strategy ETF and Invesco Galaxy Bitcoin ETF.)

Generally speaking, once the Federal Register is published, the SEC will formally initiate the review. The default review period is only 45 days. However, the review period can be extended.

Therefore, delaying the review results has become a "tried and tested" tactic for the SEC.

This year's "ETF wave" can be traced back to Cathie Wood's ARK. As early as May 15, the ARK 21 Shares Bitcoin ETF was published in the Federal Register. BlackRock, which manages more than $9 trillion, applied for a Bitcoin ETF in June, which also caused a wave of excitement in the industry. The U.S. Securities and Exchange Commission published the fund proposal in the Federal Register on July 19, starting a 45-day countdown for the Commission to rule on the product.

However, the SEC has not yet made a decision on these ETFs.

On August 11, the SEC once again extended the review time for Ark Investment Management and 21 Shares’ Bitcoin ETF applications. According to the SEC’s review rules, the review can be extended for up to 240 days.

Of course, the ETF application that was postponed again today is similar. The SEC filing indicated that WisdomTree’s ETF application was postponed to October 17.

The SEC seems to be trying to delay making a final decision, and did not give a specific reason for the delay. "The Commission believes that it is appropriate to specify a longer period for taking action on the proposed rule change to allow it sufficient time to consider the proposed rule change and the issues raised therein."

The market is falling and the market direction is confusing

As the SEC continues to postpone, the market has once again made pessimistic predictions about the broader market.

Coinglass data shows that in the past 24 hours, Bitcoin liquidated $48.89 million and ETH liquidated $28.76 million.

In the longest review period of 240 days, there are some key nodes where decisions have to be made: 45 days, 45 days, 90 days, and 60 days. If the SEC postpones three times, it will have to make a final decision - approval or rejection. After 240 days, the SEC will no longer be able to postpone the decision according to the process.

The change in market expectations also made the K-line trend draw a perfect "gate", and the price of Bitcoin once fell below $26,000. People can't help but wonder when the ETF issue will be settled?

Some analysts had predicted the delay long before it happened. Bloomberg analyst James Seyffart said on August 15 that he thought the early September deadline for the review might not see the end of the review. He believed that the review was bound to be delayed and he was more concerned about the final deadline of January 10.

Grayscale wins the lawsuit, whales profit

Judging from the market trends, Grayscale’s victory in the lawsuit was a high point in this round of ETF narrative’s strong stimulation of the market.

But as the facts gradually become clear, people begin to wonder, is Grayscale's victory really a victory for BTC? Although Grayscale won a judicial victory against the SEC, it does not mean that Grayscale GBTC is allowed to be converted into a spot ETF.

Bloomberg TV analyst Sonali Basak said: "This does not mean that GBTC will automatically and immediately convert into an ETF. As the court said, it only means that the SEC failed to explain why it approved the Bitcoin futures ETP instead of the product proposed by Grayscale (spot ETF)." She added that there is still a long process to go, including a 45-day appeal period, when both parties will review the ruling and the SEC can also request a full hearing. "It is not clear whether Grayscale needs to resubmit its application to convert GBTC into an ETF."

In short, the court just believes that the SEC's rejection of Grayscale's application was not in compliance with the rules, nothing more. After going through the review process again, the SEC can still use other reasons to reject Grayscale's application again. However, such an ambiguous piece of news has brought a strong stimulus to the market.

When we turn our attention back to the period before Grayscale won the lawsuit, it is not difficult to find that in the few days before the victory, the whales were constantly making plans and making huge profits.

Santiment monitoring data shows that wallets holding 10-10,000 BTC increased their holdings by nearly $400 million in BTC the day before Grayscale’s victory was announced. Despite the lack of empirical evidence, people still suspect that the whale address may have known in advance the outcome of the Grayscale-SEC lawsuit based on trading operations.

Grayscale's victory seems to have created an opportunity for the whales to leave. Before Grayscale won the lawsuit, nearly 30,000 BTC were transferred to CEX, which was worth $822 million at market prices.

On August 29, Markus Thielen, head of research at Matrixport, Wu Jihan’s crypto finance company, said, “We will go long on Bitcoin and strictly stop losses, expecting U.S. Treasury yields to fall and U.S. technology stocks to rise.”

“buy the rumor, sell the news”

Trading based on news is always dangerous, as it is difficult for people to react to trading immediately when news is disclosed.

In just 48 hours, the market has returned to square one after experiencing ups and downs. A group of whales may have made profits, while another group of retail investors have experienced large liquidations.

Eric Balchunas, senior ETF analyst at Bloomberg, said he would not be surprised if the SEC postponed the ETF application. He believes that the timeline of the review period is not important. "It is still possible that the SEC will make concessions at some point, and we will eventually see these applications approved." He predicted that the probability of a Bitcoin spot ETF being launched this year is 75%, and the probability of launching by the end of 2024 at the latest is as high as 95%.

As the impact of ETFs came to an end, the market turned pessimistic again. Although many people believe that the approval of spot Bitcoin ETFs may bring a huge boost to the market, this event is still too far away from us.

As time goes into September, our market is turning negative again. Historically, September is the worst month for Bitcoin. From 2013 to date, Bitcoin has only achieved monthly profits twice (2015 and 2016) in September, and the rest of the years have been losses.

Perhaps we still need to be more patient with the market trend. There are no potential major positive events expected in September, but in October, the potential approval of the Ethereum futures ETF may be the next major event to drive the market.