In a significant development for the cryptocurrency market, Fidelity Investments is reportedly preparing to file for a new spot Bitcoin exchange-traded fund (ETF). According to a source familiar with the matter, Fidelity Investments, an asset management firm, is anticipated to submit a filing to the U.S. securities regulator for a spot Bitcoin exchange-traded fund (ETF). This move aligns Fidelity with other prominent money managers who are also seeking to introduce Bitcoin ETFs, as reported by The Block on Tuesday.
Financial Giants Rally for Spot Bitcoin ETFs, Bitcoin Price Hits One-Year High
During the last fortnight, a slew of notable financial institutions, including BlackRock (BLK.N), WisdomTree (WT.N), Invesco (IVZ.N), VanEck, and Bitwise, have submitted fresh applications to the U.S. Securities and Exchange Commission (SEC) for spot Bitcoin ETFs. This surge in applications has propelled the price of Bitcoin to soar above $31,000 on June 23, reaching its highest level in over a year. Fidelity, when approached, opted not to comment on the matter.
Fidelity, along with Citadel Securities, Virtu Financial (VIRT.O), Charles Schwab (SCHW.N), Paradigm, and Sequoia Capital, forms a consortium that has unveiled EDX Markets, a cryptocurrency exchange. This collaborative effort signifies a considerable level of optimism within the group regarding the potential launch of a Bitcoin ETF. Edward Moya, Senior Market Analyst at Oanda, expressed the prevailing sentiment: “There’s a lot of optimism here that you’re going to get a Bitcoin ETF.”
SEC Remains Cautious on Spot Bitcoin ETFs Despite Approval of Futures-based ETFs
According to Edward Moya, Senior Market Analyst at Oanda, approving a spot Bitcoin ETF filling could have significant implications, including increased institutional investment and potential re-entry of high-net-worth retail traders into the cryptocurrency market. Since October 2021, regulators have permitted futures-based Bitcoin ETFs, which track the price of Bitcoin futures contracts.
However, spot Bitcoin ETFs, which directly mirror the price of Bitcoin, have faced repeated rejections by the SEC in recent years. Notably, Fidelity’s application for a spot in Bitcoin ETF was rejected in January 2022. The concerns raised by regulators revolve around the potential manipulation of the underlying market.
Edward Moya highlighted that BlackRock’s decision to file for a spot Bitcoin ETF filing was a significant game-changer. BlackRock’s track record indicates that it pursues ETF filings only when it believes there is a high probability of approval. This move by BlackRock has played a crucial role in reversing the prevailing negative sentiment within the Bitcoin and cryptocurrency markets.
The filing of the ETF has brought about a shift in sentiment, which was previously overshadowed by a series of crypto company failures, including the unexpected collapse of the FTX exchange in late 2022. Authorities have alleged that FTX was involved in a multi-billion dollar fraud, contributing to the decline in confidence across the industry.
Regulatory Challenges and Lawsuits Impact Crypto Sector and Spot Bitcoin ETFs
The crypto sector has faced increasing regulatory scrutiny in recent times, impacting market sentiment. This month, two major crypto exchanges, Binance and Coinbase Global (COIN.O), were sued by the SEC for allegedly violating regulatory rules, although both companies have denied these allegations.
The filings for spot Bitcoin ETFs have been perceived by investors and speculators as a positive sign for the crypto industry, according to Alex Adelman, CEO of Bitcoin rewards company Lolli. The involvement of institutions like BlackRock and Fidelity, which provide expertise and custodial services relied upon by top retailers serving global consumers, adds to this vote of confidence.
In a separate development, the SEC is currently facing a lawsuit from Grayscale Investment. The lawsuit stems from the SEC rejecting Grayscale’s application to convert its flagship spot Grayscale Bitcoin Trust (GBTC.PK), into an ETF. The case, expected to conclude by the end of summer, hinges on the argument that the SEC has previously approved certain surveillance agreements to prevent fraud in futures-based Bitcoin ETFs. Grayscale contends that a similar arrangement should apply to its spot fund since both spot and futures funds rely on Bitcoin’s price for their operation.
In conclusion, the reported plans of Fidelity Investments to file for a spot bitcoin ETF filing, along with the increasing number of applications from other financial giants, indicate a growing interest in bringing regulated investment vehicles to the cryptocurrency market. While regulatory hurdles and concerns over market manipulation persist, the potential approval of a Bitcoin ETF could attract institutional and retail investors, further establishing cryptocurrencies as a mainstream investment option. The outcome of these developments will shape the future landscape of digital asset investments.
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