8:00 a.m. EST on January 8 (8:00 p.m. BJT on January 8) is the deadline for submission of spot Bitcoin ETF application documents set by the U.S. Securities and Exchange Commission (SEC). Except for Hashdex, the other 10 major applicants have submitted the final version of the S-1 document (Grayscale is S-3), which is an important information disclosure process in the ETF application process.

Whether it is approved or not only depends on the final response from the SEC. Although this highly anticipated ETF has not yet been finalized, several applicants have already started a fee war.

According to the updated document, BlackRock's "flexible policy" caught the other party off guard. Its iShare Bitcoin Trust fee rate is "0.20% for the first 12 months or the first $5 billion, and 0.30% thereafter." The flexibility gives it a low fee advantage after listing. After the fee rate was announced, ARK quickly adjusted the figure from 0.80% to 0.25%.

Another battlefield is the price of Bitcoin. Affected by various ETF news, BTC has been up and down in the past week. It broke through $45,800 on January 2, and fell to $42,200 the next day. In the following days, it repeatedly consolidated between $42,000 and $43,000. In the early morning of January 9, Bitcoin broke through $46,000 and then rose to $47,000.

In the 10% fluctuation, the market sentiment of crypto assets has been repeatedly rubbed by the news of ETFs, and the entire market is watching the key node on January 10. According to the previous application cycle table, the SEC needs to make the final round of responses to ARK 21Shares' application on this day.

Previously, some analysts predicted that if the SEC approved the proposal, all of these spot Bitcoin ETFs would likely be approved at once. The SEC will reveal the answer to whether the prediction is correct on January 10, Eastern Time.

Market sentiment is repeatedly rubbed by news

If we follow Eastern Time, there are less than 48 hours left until the SEC's deadline for responding to ARK, the applicant for the spot Bitcoin ETF.

In the week before this, the cryptocurrency market, led by Bitcoin, repeatedly chafed investors’ nerves due to price fluctuations. BTC plunged from above $45,800 to $40,000 in 7 days, and then kept jumping sideways in between.

High volatility also triggered a blowout in the futures contract market.

Crypto asset futures market liquidation data at midnight on January 9th, Beijing time

According to Coinglass data, in the early morning of January 9th, Beijing time, the total amount of liquidation of futures contracts in the entire market reached 227 million in 24 hours, the total amount of liquidation in the BTC market was 37.6716 million US dollars, the total amount of liquidation in the ETH market was 31.4557 million US dollars, and the total amount of liquidation in other altcoin markets was even more terrifying, at 47.4022 million US dollars.

The biggest factor affecting market sentiment is the news about the spot Bitcoin ETF.

Since the beginning of the new year, various insiders who predict whether the SEC will "pass" or "fail" have continued to appear in the news market, and the "pass faction" has started to play a fuss about the date, sometimes drawing the end point at last weekend, and sometimes at this week's working day. There is even news that has gone viral in the market without even aligning the date and day of the week; the "pessimistic faction" simply says "none of them will pass."

The change in market sentiment has attracted the attention of the SEC. On January 6, the SEC's Office of Investor Education and Advocacy issued a document titled "Reject FOMO," reminding retail investors to pay attention to the risks of crypto assets, including meme coins, cryptocurrencies, and NFTs. Immediately afterwards, another interpretation of this article came out, and the argument was still about whether the prediction would pass or not.

Instead of listening to news, it is better to follow the timetables and prescribed actions of all parties under the requirements of US law.

According to the previous application cycle table, the deadline for the SEC to make the final response to ARK 21Shares' application is January 10, which is why people in the crypto asset market are waiting for this day. The final response period for the remaining seven companies, including BlackRock, is in March this year; Global X is in April, and the latest are Hashdex and Franklin, both in May.

SEC's final response time to applicants

According to the application process, two technical requirements must be met before the spot Bitcoin ETF begins trading.

First, the SEC must sign the 19b-4 document submitted by the ETF listing exchange, which is a form used by self-regulatory organizations (SROs) such as regulated exchanges to record rule changes to the SEC. When submitting the document, these exchanges must prove to the SEC the rationale for the new rules, including supporting a fair trading market, providing investor protection and necessary supervisory procedures.

Currently, 11 applicants for spot Bitcoin ETFs and the exchanges they intend to list on have completed this work.

Secondly, the SEC must approve the relevant S-1 document, which is the registration application of the potential issuer, containing basic business and financial information. The deadline for this document is 8 a.m. Eastern Time on January 8.

At the end of last year, the applicants held more than 20 meetings with the SEC regarding S-1. The vast majority of applicants completed the improvement of the S-1 form in December. One of the important items was to replace the physical redemption model with a cash redemption model, so that the spot Bitcoin ETF could better meet regulatory requirements.

At present, all 10 major applicants have submitted updated versions of the S-1 documents. The most surprising one is Hashdex, which seems to have missed the deadline and the approval may be delayed. Grayscale needs to submit an S-3 document due to product changes.

Next, the 19b-4 and S-1 documents will be reviewed by two different departments of the SEC, with the Corporate Finance Department responsible for reviewing the S-1 and the SEC Trading and Markets Department responsible for reviewing the 19b-4. If both documents are approved, according to past practice, the official trading of the ETF will start on the next business day after approval.

Applicants start a rate war

With the termination of S-1 filings, information such as the transaction fees and seed funds of each applicant's ETF products has surfaced, and transaction fees have become a competitive battlefield for issuers.

According to the latest S-1 filing, BlackRock's fee rate is flexible: "0.20% for the first 12 months or the first $5 billion, and 0.30% thereafter." This rate is not only lower than analysts' previous forecasts, but also a clear blow to market competitors.

In addition to BlackRock, Invesco, ARK, and Bitwise have currently designed low fees within a certain period or a certain total transaction amount. ARK/21Shares' previous fee rate was 0.80%. After seeing the competitive advantage of its competitors, it announced an adjustment to 0.25%, and a 0 fee rate for the "first 6 months or first US$1 billion" of transactions.

Comparison of Fees of Various Bitcoin Spot ETF Products

In the view of Eric Balchunas, senior analyst at Bloomberg, the difference in fees between Bitcoin ETF products will not have much impact on the competitiveness of issuers and the market size. "Investment advisors are more concerned about regular fees because they are long-term investors. Given that all these ETFs are doing the same thing, perhaps the fees will have an impact when other conditions are equal."

Seed funds are the initial investment that allows an ETF to launch and begin trading. They are the issuing units that form the basis of an ETF, making it easier for investors to trade ETF shares on the open market.

Currently, Bitwise is the largest known applicant for the seed fund, except for Grayscale, an early institutional Bitcoin hoarder. On December 29, the company disclosed that a buyer planned to purchase $200 million in shares as a seed fund, an amount higher than VanEck's $72.5 million.

The latest news shows that the US crypto asset hedge fund Pantera Capital plans to invest $200 million in the potential Bitwise Bitcoin ETP Trust. This hedge fund company is likely to be the buyer previously hinted by Bitwise.

Judging from the size of the seed fund, apart from old players like Grayscale, the initial amount of funds for Bitcoin spot ETFs is only about 300 million US dollars, which is less than the daily trading volume of mainstream crypto asset exchanges. As for how much new funds this market can attract, some analysts compare it with gold ETFs. As of now, the total assets of gold ETFs in the US market are 114.7 billion US dollars.

There are still some variables in the approval of spot Bitcoin ETF in the United States, but as more and more information in the S-1 document is transmitted to the market, the price of BTC has surged again. In the early morning of January 9, data from the exchange Binance showed that BTC once soared to US$47,248, breaking the previous high and setting a new high this year.

(Disclaimer: Please strictly abide by the laws and regulations of your location. This article does not represent any investment advice)