According to a recent report by JPMorgan, the U.S. Securities and Exchange Commission (SEC) may find itself embroiled in legal disputes should it decline to approve spot bitcoin exchange-traded fund (ETF) applications. Led by analyst Nikolaos Panigirtzoglou, the financial services giant suggests that any such rejection, although considered unlikely, could lead to lawsuits against the SEC. Hence, this would increase the agency’s legal entanglements.
Moreover, Panigirtzoglou pointed out that the SEC may hesitate to invite new litigation surrounding the issue. This hesitance is based on the SEC’s recent legal setback against Grayscale Investments. Significantly, a court had ruled in favor of Grayscale, requiring the SEC to revisit the application for converting its bitcoin trust into a spot bitcoin ETF. Furthermore, the agency refrained from appealing the court’s decision, thereby solidifying its outcome.
Observations on Bitcoin’s recent performance
Besides the legal implications, JPMorgan analysts also focused on the bitcoin market. Over the last seven days, the cryptocurrency has witnessed nearly a 20% price surge. According to the JPMorgan team, this growth is propelled by institutional demand rather than the typically observed retail-driven performance. Additionally, metrics indicate a considerable spike in futures positions based on CME bitcoin futures. These positions are mainly used by institutional investors and have reached their highest levels this year. Moreover, the levels surpass those seen in August 2022, prior to the FTX market collapse.
In contrast, the corresponding positions for CME Ethereum futures remain comparatively subdued. The analysis also revealed a noticeable influx of bitcoin into larger wallets, further substantiating the claim that institutional demand is driving the recent surge.
SEC’s technical preparations and filings
JPMorgan also reported today that asset managers are making headway in their technical preparations and amended filings to resolve issues concerning market manipulation and commingling of customer funds. These actions are paving the way for multiple spot bitcoin ETF approvals, which are expected within months. Such advancements indicate that the SEC and asset managers are working towards clarifying regulatory ambiguities, thereby potentially easing the path for future approvals.
Therefore, while JPMorgan’s assessment provides crucial insights into the legal and market aspects, it also serves as a precursor for potential transformations in the regulatory framework concerning cryptocurrency-based financial products. It remains to be seen how the SEC will maneuver through the complex legal and market scenarios that lie ahead.
