Bitcoin Spot ETFs Rejected by SEC, but Multiple Indications Suggest Potential Approval Reiteration

Last week (6.26-7.2), the cryptocurrency market overall continued to rebound, although with reduced momentum.

Among them, the total market cap increased from $1.17 trillion to $1.2 trillion, reaching a new high in nearly a month with a 2% rise. In contrast, market sentiment decreased from 63 to 58, which is a relatively rare divergence phenomenon and could potentially be triggered by profit-taking.

Trends of Cryptocurrency Total Market Cap and Fear Greed Index from January 1, 2023, to July 2, 2023; Source: MacroMicro.

Last week, mainstream cryptocurrencies continued to rise. Among them, Bitcoin Cash (BCH) performed the best, with a 33.7% increase, marking the highest and most significant gain for two consecutive weeks. Avalanche (AVAX) performed the worst, with no increase and instead experiencing a 0.3% decline.

Bitcoin (BTC) has risen by 1.2%, while Ether (ETH) has gained 4.3%, showing a stronger trend than BTC. It is important to note that Litecoin (LTC), Solana (SOL), and Stellar (XLM) have outperformed both BTC and ETH. This indicates a rotation of funds.

Price fluctuations of major cryptocurrencies from June 26th, 2023 to July 2nd, 2023; Source: MacroMicro.

In mid-June, after asset management giant BlackRock applied for a physically-backed Bitcoin exchange-traded fund (ETF), numerous financial institutions, such as Fidelity Investment, Invesco, VanEck, 21Shares, and WisdomTree, also submitted applications. 

However, the U.S. Securities and Exchange Commission (SEC) rejected all of them based on the grounds of unclear and insufficient application documents, stating that they could be rewritten and resubmitted.

Although the SEC has rejected all BTC spot ETF applications, it hasn't closed the door completely. It indicates that further applications are still possible, showing there is room for maneuver. 

Furthermore, the SEC has provided reasons for rejection, such as the failure to disclose the names of regulatory sharing agreement collaborators, which will assist institutions or companies in providing more precise application documents to meet the requirements.

More importantly, the US SEC's regulation of cryptocurrencies has raised doubts and suspicions of being unreasonable or even illegal. Former SEC Chairman Jay Clayton stated that the current SEC Chairman Gary Gensler has deviated from understanding the government's role. Unless the government is confident of winning, it should not take legal action.

In response to the U.S. SEC's rejection of a physically-backed Bitcoin ETF, Patrick McHenry, Chairman of the U.S. House Financial Services Committee, also expressed his opinion. If these reports are accurate, SEC Chairman Gary Gensler needs to provide an explanation, and his only reason for opposing it is to stifle the development of cryptocurrencies in the United States.

Mitrade analyst: Cryptocurrencies are a new field where many countries, including the United States, lack targeted regulatory bodies and policies. Although the US SEC has acted arbitrarily in the absence of jurisdictional authority, it does not mean that it can continue to expand indefinitely. 

As Coinbase pointed out, "Digital assets are a trillion-dollar industry that could potentially impact various sectors of the US economy. Whether and how this massive new industry should be regulated, and by whom, remains a significant unresolved issue in government policy."

If the SEC is subject to explicit regulation in the future, it will contribute to the approval of a Bitcoin spot ETF. Currently, it is evident that there has been ongoing pressure on the SEC from the external world, and this event indicates a slight easing of its crackdown on cryptocurrency, which is a positive signal.

On June 30th, the Hong Kong government announced the establishment of a dedicated task force for Web3.0 development and submitted recommendations to the government regarding Web3.0 development in Hong Kong. 

The task force consists of 15 unofficial members, primarily from government departments, financial regulatory institutions, and industry-leading companies. The members' terms became effective on July 1st and will last for two years.

Since October 2022, the Hong Kong government has been implementing various proactive and open policies and measures. These include issuing declarations, granting licenses to cryptocurrency exchanges, and allowing retail investors to trade cryptocurrencies. These clear regulatory measures provide industry development with clear guidance while preventing confusion, fraud, and other illicit market activities.

Mitrade analyst: Unlike the aforementioned, the Web3.0 task force is not driven by policy but rather by the actual market conditions. It aims to promote the development of Web3.0 in Hong Kong by seeking advice from industry professionals, which can effectively and timely address the latest market demands. This approach will attract more top institutions and professionals to converge here, contributing to Hong Kong's leading-edge development.

Bitcoin (BTC) had relatively low volatility last week, only around 1%, mainly fluctuating around the $30,000 threshold.

Bitcoin price trend from 2022 to present; Source: TradingView.

Through daily candlestick analysis, it can be observed that both the bulls and bears quickly engage in containment whenever they notice the other side gaining strength. In order to break this stalemate, external intervention is needed. Otherwise, this oscillating trend will continue to persist.

Currently, there are two potential factors that could significantly impact the market and determine the future trend of Bitcoin. The first is whether there will be an interest rate hike in July, and the second is the approval of a Bitcoin spot ETF. It is crucial to pay close attention to these developments and, whenever possible, refrain from excessive trading in uncertain circumstances.