Bitcoin Price Stalls Below $38,000 Amid BlackRock-SEC Talks
November 30 2023 - 2:35AM
NEWSBTC
The Bitcoin price rose to $38.475 yesterday, marking a marginally
higher high for the year. Nevertheless, the price did not manage to
close the day above the important $38,000 mark. Shortly before the
end of the day, the bears managed to push the price down again. As
crypto analyst Daan Crypto Trades remarked, “Market does its best
to shake out everyone trying to pre-position for a possible Bitcoin
ETF approval. It’s just free liquidity for the MMs/Whales. Sweep
highs, trap longs, squeeze out longs, bait shorts, front run lows
and repeat the whole process.” BlackRock Argues With SEC Over
Details Of Spot Bitcoin ETF In a notable development, BlackRock,
the world’s largest asset manager, has been again actively engaged
in discussions with the US Securities and Exchange Commission (SEC)
concerning the structure of its spot ETF yesterday. Eric Balchunas,
senior ETF analyst at Bloomberg, revealed, “BlackRock met with the
SEC’s Trading & Markets division again yesterday and presented
them with a ‘revised’ in-kind model design based on Staff’s
comments at their 11/20 meeting.” This revised model includes a
notable change in the process, specifically at ‘Step 4’, which is
the offshore entity market maker acquiring Bitcoin from Coinbase
and then pre-paying in cash to the US registered broker dealer who
is not allowed to touch BTC. Related Reading: Bitcoin Eyes New
Highs As Bloomberg Analyst Reiterates 90% Chance Of January ETF
Approval James Seyffart, another Bloomberg analyst, highlighted the
ongoing negotiations, adding, “More confirmation that Issuers are
still meeting with the SEC. BlackRock/Nasdaq still pushing for
In-Kind creation & redemption. Seems like SEC hasn’t budged on
cash creates demands if this was the primary focus of the meeting.
At least not before yesterday, Interesting days ahead!” The
original “In-Kind Redemption” flow had Market Maker’s Broker/Dealer
entity (MM-BD) placing an order for redemption through the
Authorized Participant (AP), who approves the order, allowing
MM-crypto to borrow Bitcoin (or cash) to sell short. This
redemption flow had potential balance sheet impacts and risks that
the SEC was concerned about. BlackRock has now proposed a “Revised
In-Kind (‘Prepay Model’)” Redemption flow. This new model involves
MM-crypto delivering cash to MM-BD instead of Bitcoin, and MM-BD
then delivers ETF shares to the Transfer Agent via API. The Bitcoin
custodian is instructed by the issuer to transfer Bitcoin to
MM-crypto, who then closes the short position in BTC. Related
Reading: The Other Side Of The Bitcoin: Analyst Highlights What
Happens If Bulls Fail The benefits of this revised model are
manifold. It aims to lower transaction costs and shifts the
execution risks from investors to crypto market makers. It also
claims to provide superior resistance to market manipulation and
remove the need for issuers to finance or pre-fund sell trades. The
reduction in risks of operating events and the simplification
across the ecosystem could mean lower variance on how In-kind
models can be executed versus cash models. 90% Odds Of Approval
Remain Should the SEC approve this revised model, it could herald
the introduction of the first US-based spot Bitcoin ETF, a
significant milestone that would allow investors to gain direct
exposure to Bitcoin rather than through derivative instruments like
futures. Despite these developments, there remains a level of
uncertainty surrounding the SEC’s stance on the matter,
particularly regarding the implications of spot Bitcoin exposure
for retail investors through an ETF. Recent leaks suggested the SEC
might prefer cash creation processes over in-kind Bitcoin
transfers, a move that could significantly alter the landscape for
ETF issuers and broker-dealers dealing with Bitcoin. Nonetheless,
Bloomberg’s ETF analysts have reiterated their 90% odds for a spot
ETF approval by January 10 yesterday. At press time, BTC traded at
$37,728. Featured image from Shutterstock, chart from
TradingView.com
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