What Happens If SEC Rejects BlackRock’s Bitcoin ETF?

Key Takeaways:

  • JP Morgan claimed the SEC might face legal trouble if it rejects more ETF applications.
  • The regulator currently has 8-10 pending Bitcoin ETF applications.
  • BTC price continues consolidating near $34,500.

NEW DELHI (CoinChapter.com) — Financial services firm JPMorgan claimed that the US Securities and Exchange Commission might face legal action if it declines to approve spot Bitcoin exchange-traded fund (ETF) applications.

JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a report that any rejection might result in the applicants dragging the SEC to the courts. The regulatory watchdog’s defeat of Grayscale, followed by its refusal to appeal the decision, might have set a precedence for other applicants.

The court formalized its ruling in October 2023, ordering the SEC to reconsider Grayscale’s application to convert its Bitcoin trust into a spot ETF.

Bloomberg analyst shared that Blackrock planned to seed its Bitcoin ETF in October.
Bloomberg analyst shared that BlackRock planned to seed its Bitcoin ETF in October.

Investment firm BlackRock has also submitted a revised application for launching a spot Bitcoin ETF. Furthermore, Eric Balchunas, senior ETF analyst at Bloomberg, shared in an X post that BlackRock planned to seed its ETF in October.

Seeding refers to the use of funds (from a bank or broker) to purchase a few creation units (Bitcoin here) in exchange for ETF shares. However, Balchunas advised traders not to read too much into the news.

The analysts at JP Morgan speculated in favor of the SEC approving BlackRock’s application. Yet, if the SEC decides to stonewall BlackRock’s application, the investment firm would definitely seek legal options against the regulator.

Furthermore, the SEC’s refusal might impact Bitcoin price too, with the cryptocurrency riding high on ETF speculations. BTC’s price recently reached a yearly high above $35,000 before correcting and consolidating near $34,500.

Multiple Bitcoin ETF Applications With The SEC

Meanwhile, Reuters reported that the SEC currently has nearly 10 filings of Bitcoin investment products. Market participants view ETFs as demand drivers as the product allows investors direct exposure to the cryptocurrency through an exchange-listed product.

Bitcoin price rode the ETF hype to reach its highest level in an year.
Bitcoin price rode the ETF hype to reach its highest level in a year. Source: CoinStats

Cathie Wood‘s Ark Invest is at the front of the line, with the SEC set to either approve or reject the firm’s application by Jan. 10, 2024. BlackRock is also on the list, along with Bitwise, WisdomTree, Fidelity, and Invesco.

JPMorgan analysts stated that the SEC would likely approve multiple spot Bitcoin ETFs “within months.”

The speculation gained traction after BlackRock reappeared on a list that the Depository Trust and Clearing Corporation (DTCC) maintains. DTCC provides post-trade clearance, settlement, custody, and information services for Nasdaq.

Bitcoin Price Continues Rally

BTC price continued its minor correction over the weekend, with the cryptocurrency token rising 2.4% to a daily high near $34,750 on Oct. 29.

However, the RSI for BTC remained overbought, clocking a score of 82.83 on the daily charts. Overbought RSI levels usually precede a correction or consolidation phase in an asset’s price action. Hence, traders often consider the occurrence a bearish signal.

BTCUSD daily price chart with RSI.
BTCUSD daily price chart with RSI. Source: TradingvView.com

As such, if the selling pressure increases, the BTC price might drop to the support near $33,100. Moreover, a breakdown below the immediate resistance support might force the Bitcoin price to test the support near $31,200.

Conversely, a spot Bitcoin ETF approval might boost BTC price to break above the resistance near $35,460. A break above the immediate resistance could liquidate multiple short positions, forcing traders to panic buy and push BTC price to the resistance near $37,200 before the rally calms.

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