The Securities and Exchange Commission's dogged fight to stop a Bitcoin ETF ended with a whimper on Friday, when the clock ran out for the agency to appeal a key court ruling. This makes it all but certain that a Bitcoin ETF will hit the markets in a relatively short time—the crypto analyst gnomes at Bloomberg gave 90% odds that a product will debut by Jan. 10.
The agency's decision not to appeal the August court ruling in Grayscale v. SEC most likely didn't come about because Chair Gary Gensler had a change of heart. Instead, the reason for the SEC folding its cards probably lies in the fact that its legal resources are already stretched thin in light of Gensler's campaign against crypto—and because the three judges in the case totally shredded the SEC's rationale for denying the ETF in the first place.
The upshot is that a long-awaited Bitcoin ETF is coming to U.S. shores sooner than later, and that an Ethereum one will likely arrive not long after that. What is less clear is what company will offer it and what this development will mean for long-slumping crypto markets.
As Fortune has reported in detail, Grayscale has been the face of the legal fight to push the SEC to green light a Bitcoin ETF, which have been available for years in Europe and Canada. But as the court proceedings began to look more favorable for Grayscale, some of the biggest names in finance—most notably BlackRock and Fidelity—filed applications to offer one too. Given that it would be safer in terms of optics for the SEC to give the prize to a familiar name from traditional finance, it wouldn't be a surprise if Gensler processes the applications in a way that lets someone like BlackRock go first.
The more intriguing question, though, is the second one—what a long-awaited ETF means for the crypto markets. For years, the crypto industry has hyped the impending arrival of institutional money as a game changer that will turbo charge the markets by bringing in billions of dollars of new capital and drive up prices. I think there is something to this argument and, in the context of the impending ETF, it's easy to imagine giant asset managers nudging their numerous clients to add a small slice of Bitcoin to their portfolios.
A troubling thought for the industry, though, is what if this doesn't happen? What if the door to institutional money finally swings open but few people choose to walk through it? For months now, crypto prices have scuffled along at respectable levels—Bitcoin is up 75% since the start of the year—but volumes have dropped to levels not seen in years. This has created the impression that crypto is passé and shaken the confidence of some in the industry. A big ETF-fueled price rally would turn this narrative around in a hurry and provide some much-needed enthusiasm—but if no rally materializes, the pressure will only grow for the crypto industry to prove that current conditions are about to change.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
