Bitcoin saw a price surge on Tuesday as a result of the U.S. Court of Appeals for the DC Circuit deciding that the Securities and Exchange Commission had acted wrongly when they disallowed Grayscale, a popular crypto investment firm, from transforming its bitcoin trust into an ETF. Coin Metrics reported that the crypto was announced to be 7.15% higher at $27,851.82. The ruling gave cryptocurrencies and crypto-related equities an overall boost.
The SEC's denial of Grayscale's proposal to turn its bitcoin trust (GBTC) into an ETF had investors and other industry participants closely monitoring the situation, as a change of this kind could potentially shake up a market characterized by low volatility and liquidity levels. Bitcoin trading volatility had in fact dropped to its lowest level in over four years due to investors waiting on the sidelines for more regulatory clarity. In October 2021, the SEC approved ProShares' bitcoin ETF based on futures, spurring Grayscale to follow suit, although to no avail. Tuesday's court ruling reversed the decision, and may increase the likelihood of requests from other companies, such as BlackRock, Fidelity, WisdomTree, VanEck and Invesco, being approved. This would provide a way to get exposure to bitcoin without having to hold it, which would likely invite both retail and institutional investors as well as wealth managers into the market. While the SEC is reviewing the decision to ascertain what the next steps will be, Galaxy's Global Head of Asset Management, Steve Kurz, stated that the ruling indicates "the ETF structure can enable greater access to and transparency across cryptocurrency investing, and truly help further democratize the asset class." This ruling serves as a source of relief for those in the crypto industry who have been frustrated by the SEC’s stringent enforcement regime - in particular, its lawsuit against Coinbase - and its reluctance to provide greater clarity in the rules businesses must abide by. Following the court ruling, the Grayscale Bitcoin Trust itself experienced a 16.95% surge.
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