There has been much speculation lately about whether asset managers like BlackRock can use insider knowledge to “front run” their Bitcoin spot ETF approvals. However, Bloomberg ETF analyst James Seyffart is here to clear the air and dispel these rumors. According to Seyffart, ETF applicants will only begin buying BTC within days of their funds’ actual launch. This serves the purpose of “seeding” the ETF with funds in advance so that it is ready to sell shares to investors once it goes live. Seyffart states, “It’s not like they’re out there buying Bitcoin on their balance sheets specifically to maintain exposure.” Therefore, the idea that BlackRock can manipulate the market through insider trading is simply overhyped.
While BlackRock may not be able to utilize insider knowledge for their Bitcoin spot ETFs, they can still invest in other private Bitcoin products. For instance, they may turn to their private Bitcoin trust if their customers are already purchasing BTC ahead of the ETF approval. This has led to increased inflows to alternative Bitcoin funds, including Canadian Bitcoin ETFs and futures-based ones in the United States. It seems that investors are getting excited about the prospect of a Bitcoin ETF approval and are positioning their portfolios accordingly.
What sets this time apart from previous Bitcoin ETF rejections? Seyffart points to Grayscale’s court victory over the Securities and Exchange Commission (SEC) in August. This win seems to have changed the game and increased the odds of approval significantly. In fact, when the SEC started providing comments on S-1 documents in October, Seyffart states that the odds of approval jumped to 90%. This break in the pattern gives hope to cryptocurrency enthusiasts and opens the door for multiple Bitcoin spot ETFs to be approved simultaneously.
BlackRock’s initial plan was to seed their fund with $100,000 before launch, but in an updated filing, that amount has soared to $10 million planned for January 3. Analysts like Seyffart predict that multiple Bitcoin spot ETFs will receive approval between January 5 and January 10, based on the timing of pending comment periods and approval deadlines of rival applicants. However, the derivatives market for Bitcoin is showing a bearish sentiment leading up to the approval date, indicating that many believe the ETF approval will be a “sell the news” event. On the other hand, some industry experts, like former NYSE president Tom Farley, believe that once an ETF is approved, money will flood into the industry.
While there may be concerns about insider knowledge and market manipulation, BlackRock’s actions indicate a more cautious and calculated approach to launching Bitcoin spot ETFs. Rather than rushing to buy large amounts of BTC in advance, they will wait until the last moment to ensure the ETF is properly seeded. Additionally, the recent court victory by Grayscale and increased inflows to alternative Bitcoin products have fueled optimism for the approval of multiple Bitcoin spot ETFs. Only time will tell how the market will react to this news, but the anticipation is certainly building.