BlackRock: Will Bitcoin ETFs Yield to SEC's Cash Demand?

• The US SEC has been pushing Bitcoin spot ETF applicants to follow the path of cash redemption instead of in-kind settlement plans.
• Analysts still hold the January 10 deadline as the expected timeline when the US SEC will approve the batch spot Bitcoin ETFs

The debate on the spot Bitcoin exchange-traded funds (ETFs) in the United States continues to point to an imminent approval in the coming few weeks. The United States Securities and Exchange Securities (SEC) has met with several applicants including Grayscale Investments, and BlackRock to iron out final details that will lead to the batch approval of the dozen applicants by January next year, as most Wall Street analysts project.

Already, the spot Bitcoin ETF applicants are making strategic investments in Bitcoin-related firms like mining companies in a bid to accrue at discounted prices. Moreover, the race to acquire the limited Bitcoin units is not only between the United States investors but also between global investors including countries and retail investors.

Can BlackRock Get Approval with In-kind or Forced to Cash Redemptions

Having met with several applicants in the past few weeks, the United States SEC is seemingly leaning on cash-settled spot Bitcoin ETFs in place of securities like stock and other cash equivalents. According to Bloomberg ETF analyst James Seyffart, the US SEC will force all applicants to use the cash redemption model.

The bold prediction is after Invesco, one of the spot Bitcoin ETF applicants, indicated that it will offer cash redemption only to its clients. However, BlackRock, which has historically had a high winning streak for ETF approvals, indicated that it could use the in-kind model in addition to the cash creations.

Worth noting that other spot Bitcoin ETF applicants like Galaxy Digital, and Fidelity have all agreed to cash-settled for their clients. The cash-settled spot Bitcoin ETFs could significantly reduce the friction of liquidating the securities for the providers to purchase Bitcoin equivalent for the respective clients. Nonetheless, there are a lot of funds held in securities like stock indexes, and treasury bonds that are expected to be poured into the Bitcoin market.

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The high interest in Bitcoin and other digital assets by institutional investors has significantly improved the crypto liquidity despite the regulatory crackdown. Already, Google has changed its policy on crypto advertisements in a bid to attract more revenue from the web3 industry.

On Wednesday, the Federal Reserve held its borrowing rate unchanged after a period of consecutive hikes in the past two years to tame high interest. With projections of interest rate cuts next year, more funds are expected to flow into the crypto investment products.

BTC Price Action

Bitcoin price could continue rallying toward $50k in the coming weeks if the bulls hold on to the support level above $40k. Trading around $43,200, Bitcoin price has surged about 5 percent in the past 24 hours despite the accelerated profit taking from whales and miners. Meanwhile, Bitcoin’s bullish momentum could continue to slow down as more cash flow goes to the altcoin market in the short term.