It was a “blink and you’ll miss it” moment…
It happened on Monday, right before the U.S. stock market opened.
A rumor began to spread online. Regulators had approved an exchange-traded fund (“ETF”) that invests in bitcoin directly – what’s known as a “spot” bitcoin ETF.
The news sent bitcoin from $27,000 to $30,000 in minutes.
It’s easy to see why…
An ETF would allow investors to own bitcoin without the hassle of buying it on a crypto exchange and storing it in a digital wallet.
This would open the door for investors who’d like to own bitcoin through their brokerage accounts.
There was just one problem – the rumor wasn’t true.
And bitcoin sold off again almost as quickly as it had rallied.
But it didn’t give up all its gains. As I write, the cryptocurrency trades at about $28,500.
Investors haven’t completely discounted the rumor, either.
And as we’ll look at today, they’re right not to…
The SEC is losing its battle to stop a bitcoin ETF. When it finally admits defeat… and approves an ETF… bitcoin will soar.
The real news on bitcoin came last Friday…
That’s when the deadline passed for the SEC to appeal a ruling against it made by a federal appeals court.
One company that wants a bitcoin ETF is Grayscale Investments.
It wants to convert its popular bitcoin trust, the Grayscale Bitcoin Trust (GBTC), into an ETF.
This would mean lower costs for investors. It will also better track the price of bitcoin. (Its current structure means it often trades above or below the bitcoin price.)
The SEC shot down Grayscale’s proposal. Grayscale appealed the decision in court. And in August, it won a big victory.
A federal appeals court ordered the SEC to vacate its rejection of Grayscale’s ETF filing.
And Judge Neomi Rao said the SEC had been “arbitrary and capricious” in rejecting applications for a spot bitcoin ETF while greenlighting more complicated ETFs trading in bitcoin futures contracts.
Now, this doesn’t mean Grayscale has been approved to convert its trust into an ETF.
But the SEC’s failure to appeal the ruling has been a major stalling factor for a bitcoin ETF.
It’s a message Teeka Tiwari has been hammering on…
If you don’t already know him, Teeka is a hedge fund manager turned newsletter analyst.
And in 2016, he became the first guy in our industry to recommend bitcoin at a major financial newsletter.
He recommended bitcoin at $428 and Ethereum – now the world’s second-largest crypto at $9.
And since then, they’re up about 6,600% and 17,300%.
And as he recently told his readers, a spot bitcoin ETF is now a matter of when, not if. Here’s Teeka with more on that…
Nothing is easy when it comes to crypto and crypto adoption. So, I fully expect that the SEC will drag its feet. It will come out with new reasons as to why it doesn’t want to approve a bitcoin ETF.
But the writing is on the wall. We’re going to get a bitcoin ETF. The court unanimously came out and just executed every single point the SEC tried to bring up for why it should not allow a spot-settled bitcoin ETF.
To me, it’s not whether we’re going to have an ETF, it’s just a question of time. Now that this ruling is in place, it’s removed a massive hurdle for bitcoin ETFs to get approved.
And a bitcoin ETF isn’t the only reason why bitcoin will rally…
The next “halving” happens six months from now…
The supply of new bitcoin is governed by code. Per that code, there can only ever be a maximum of 21 million bitcoins in circulation… And every four years, there’s a “halving” of the new supply.
That’s where the reward for mining bitcoin transactions – the rate of new supply – gets cut in half.
So, when an asset’s supply plunges like that, even steady demand will cause prices to rise.
If demand goes up, prices skyrocket.
The last halving was in 2020.
Even with the pandemic fears and a recession, bitcoin soared from a panic low of $3,000 to $65,000 by mid-2021.
That’s a gain of nearly 22x. A similar move today with bitcoin at $28,000 would take the price to $606,000.
Each halving has seen a smaller percentage price rise than the prior one as the rewards for mining are reduced. But cutting that 22x return in half to 11x still leads to a potential move to $303,000.
I’m not saying bitcoin will go up in a straight line…
Given its famous volatility, it will make some big drops along the way.
But with a bitcoin ETF looking more likely, and the next halving on the way, bitcoin is a must-own speculation going into 2024.
The SEC won’t be able to push a ruling out much further than next spring.
And with the halving coming right around the same time, bitcoin may finally clear the $100,000 hurdle by the end of next year.
That’s a nearly 257% return if you buy today.
Just remember to never bet the farm on bitcoin.
With such huge potential upside, even a small stake can lead to a meaningful return.
Regards,
Chris Lowe
Editor, The Daily Cut