JPMorgan analysts, led by Nikolaos Panigirtzoglou, in a recent report, warned that the U.S. Securities and Exchange Commission (SEC) could face legal challenges if it denies approval for spot Bitcoin exchange-traded fund applications. 

This comes amidst a surge in institutional demand pushing Bitcoin’s value higher. The bank suggests that such a decision by the SEC might provoke applicants to retaliate legally, further complicating the regulatory landscape.

The Increasing Acceptance of Bitcoin ETFs

Following a lawsuit in which Grayscale Investments secured a favorable verdict, there’s been a significant shift in the SEC’s stance towards spot Bitcoin ETFs.

Grayscale’s win mandated the SEC to re-evaluate their application to metamorphose its existing Bitcoin trust into a spot Bitcoin ETF. With the SEC not contesting the court’s ruling, the decision became final recently.

The bank’s analysts, spearheaded by Nikolaos Panigirtzoglou, emphasize the legal challenges the U.S. Securities and Exchange Commission (SEC) might confront if it denies approval for spot Bitcoin ETF applications. The report, released on Wednesday, suggests that such a decision could spark legal retaliation from the applicants.

Panigirtzoglou clarified that while the odds of rejection are low, they are not negligible. He further expressed his belief that the SEC would ideally avoid another round of legal disputes concerning the approval of spot Bitcoin ETF.

The bank’s analysts believe the gates will soon open for multiple Bitcoin ETF approvals. Current events highlight active engagements between asset managers and the SEC. 

These interactions, characterized by technical preparations and amended filings, aim to address predominant concerns, including potential market manipulation and issues surrounding the handling of client funds.

The U.S. Securities and Exchange Commission (SEC) recently experienced a legal blow in its dispute with Grayscale Investments. Last month, a court sided with the crypto asset manager, compelling the SEC to re-evaluate Grayscale’s proposal to transition its bitcoin trust into a spot bitcoin ETF.

Significantly, the SEC opted not to challenge the verdict, leading to the court’s decision being cemented earlier this week.

Institutional Appetite Drives Bitcoin’s Latest Surge

Bitcoin’s latest ascent, seeing an almost 20% increase over the past week, is chiefly attributed to institutional demand rather than retail activity, say JPMorgan analysts. The optimism surrounding the potential approval of a spot bitcoin ETF plays a significant role in this surge.

Evidence of this institutional-driven demand comes from the futures position proxy based on CME bitcoin futures. These futures, primarily utilized by institutional investors, have seen a noteworthy spike, reaching their peak for the year and echoing levels seen before the FTX collapse in August 2022. This contrasts with CME Ethereum futures, which have remained relatively stagnant.

Further bolstering the argument for institutional interest is the notable influx of bitcoin into larger wallets, indicating a significant demand from institutional investors.