Matrixport, a leading platform in digital finance, published today, November 22, an exhaustive investigation note focusing on the important implications of yesterday’s events on the crypto industry, particularly as they relate to the prospects of a spot bitcoin exchange-traded fund (ETF) in the United States.
Following Binance CEO Changpeng Zhao’s (CZ) guilty plea and the significant financial settlements involved, Matrixport suggests that the path to approving a spot bitcoin ETF may have become significantly clearer. The note highlights regulatory crackdowns and compliance improvements in the crypto sector, indicating a shift towards greater regulatory alignment with traditional financial systems (TradFi).
“Some would say that US agencies have cleaned up the industry this year by dismantling cryptocurrency-related US banks, as two of them ran an internal ledger that cryptocurrency companies could use 24/7 of the week to transfer fiat money. Arguably there are few (perceived) major players left, and with bitcoin falling just -3.4% over the last 24 hours, the market is enduring a major risk aversion event,” comments Matrixport.
Spot bitcoin ETF Approval Odds at 100% Now?
The company notes that as strict enforcement actions and enhanced compliance programs become the norm among cryptocurrency exchanges, differentiation between regulated and unregulated cryptocurrency exchanges may become a key metric in 2024. This change is seen as pivotal in the potential approval of a Spot bitcoin ETF in the US, a development long awaited by the industry.
“The result will likely be more exchanges improving their compliance programs and becoming part of a shared surveillance arrangement, which will be critical to approving a spot bitcoin ETF in the US,” the firm stated, and He added: “With this plea agreement, expectations for a spot bitcoin ETF could have increased to 100% as the industry will be forced to follow the rules that TradFi companies must follow.”
The firm believes that this “whitewashing” of the industry will not only improve the adoption of bitcoin by institutional players, but will also position it as a safe haven asset in investment portfolios. “More importantly, the cover-up of this industry will strengthen the case for bitcoin adoption for institutional players and will likely become a safe haven asset in investors’ portfolios,” Matrixport predicts.
The note also discusses the pre-sale of the FTX exchange and its possible relaunch under a management team that complies with US securities laws by the third quarter of 2024. Matrixport speculates that this could generate significant inflows, estimated between $24 and 50 billion, on any US market listed bitcoin ETF. They also point to the growing trend of crypto companies creating markets with CME-listed crypto derivatives, signaling a shift from unregulated exchanges focused on retail trading to those that are fully regulated and serve institutional clients.
‘Dark cloud lifted’ as ETF advances
Analysts and industry experts have echoed Matrixport’s sentiments. Will Clemente, a prominent analyst, fixed, “With the ruling on Binance, it’s only a matter of weeks until the bitcoin ETF is approved.” Tony “The Bull” Severino, Head of Research at NewsBTC, commented, “A dark cloud has just been removed from the cryptocurrency market.” In contrast, Scott Johnsson, a financial lawyer at Davis Polk, offered a more cautious view, suggestion that “It is much more likely that an ETF decision led to the Binance resolution than the other way around, in my opinion. And I’m not convinced that’s likely either.”
Surprisingly, there has been some movement in the spot ETF approval process in recent days. Ark Invest has initiated the third round of amendments to S-1 filings, Grayscale had a meeting with the U.S. Securities and Exchange Commission yesterday regarding its “uplist.”
At the time of this publication, btc was trading at $36,483.
Featured image from Shutterstock, chart from TradingView.com
