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SEC decision on ETH Spot ETFs due plus Grayscale gets first net inflow: Fineqia

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Matteo Greco, Research Analyst at Fineqia International, writes that bitcoin closed last week at approximately USD66,300, marking a 7.8 per cent increase from the previous week’s closing value of around USD61,500.

The week was characterised by low daily volatility, with most of the price increase occurring on Wednesday, while the rest of the week exhibited stable price action, Greco says.

“Last week’s positive price movement was also driven by increased demand for BTC Spot ETFs. After five weeks of low demand, resulting in about USD1 billion in cumulative net outflows, BTC Spot ETFs saw about USD950 million in net inflows last week, reflecting a demand level not seen since March.”

Grayscale’s ETF (GBTC), which had been trading as a trust before converting to an ETF in January 2024, experienced its first weekly net inflow. This suggests that the trend of outflows, which totalled about USD17.6 billion since January, may be reversing, aligning GBTC’s inflow/outflow patterns with those of its competitors, Greco says.

“Trading volume for BTC ETFs remained relatively steady, with cumulative trading volume since inception reaching USD262.6 billion and recording USD8.6 billion during the week. The trading volume aligns with figures from recent weeks, maintaining stability in the range of USD1.5 to USD2 billion in daily volume, following a period of exceptionally high trading activity in February and March.”

In terms of ETFs, the Securities and Exchange Commission (SEC) is expected to make a final decision on Ethereum (ETH) Spot ETFs this week, with the final deadlines for VanEck and Ark 21Shares filings on May 23rd and 24th, respectively.  Greco writes that this decision could trigger a series of approvals or rejections, as the SEC is likely to apply the same criteria to all seven ETH Spot ETF applications.

“Market participants expect the SEC to withhold approval for these products, despite approving BTC ETFs in January. Concerns over the liquidity of ETH’s spot and futures markets, along with its previous classification as a security by the SEC, contribute to scepticism about swift approval. If rejected, issuers would need to resubmit filings, potentially leading to approval in Q4 2024 or Q1 2025 at best.”

Greco writes that another emerging scenario involves the approval of the 19b-4 filings while “slow-playing” the S-1s. Both the 19b-4s and the S-1s must be approved by the SEC for the launch of Spot ETH ETFs. “The 19b-4s filing allows national security exchanges (e.g., NYSE or Nasdaq) to list new products, such as Spot ETH ETFs. The S-1s are the initial registration forms required for new securities offered to the public, providing detailed information about the company’s operations and products.

“The SEC might approve the listing on exchanges while delaying the initial registration form to gather more information on the ETH market and necessary risk mitigations. This decision could be favourable for issuers, as traditional finance investors seem remaining strongly focused on BTC, potentially reducing market activity around ETH Spot ETFs if launched next week.”

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