BTC ETF delays, Grayscale’s victory, Uniswap’s lawsuit

Last week was jam-packed with news that sent the crypto market on a rollercoaster ride. Buoyed by Grayscale Investments ' win in its lawsuit against the Securities and Exchange Commission (SEC), the market plunged again when the securities watchdog delayed its decision on spot bitcoin ETF filings for 45 days. Meanwhile, Uniswap 's win of a securities lawsuit in New York failed to ignite its struggling native token, UNI.?

SEC delays spot BTC decision by 45 days, sending crypto prices lower?

On the last day of August, the Securities and Exchange Commission (SEC) decided to delay its verdict on all spot bitcoin ETF applications for 45 days until October. This sent crypto markets sharply lower, erasing the previous week’s gains on the back of Grayscale’s victory in its SEC lawsuit.

These latest delays affect all applications including those from BlackRock , WisdomTree , Invesco Galaxy, iWise Origin, VanEck , Bitwise Asset Management and Valkyrie Digital Assets. This follows a postponement of the verdict on ARK Investment Management LLC ’s application earlier in the month.

Though the delay was widely expected, it still sent crypto prices north, with bitcoin down more than 4% on the day to under $26,000, while other crypto assets followed suit.?

There is no guarantee that the securities watchdog will make a final decision in October – it could delay the decision further. It has a total of 240 days from the original filings in mid-July, which could mean the final ruling comes as late as March 2024.

The Yield App View

The approval of US spot bitcoin ETFs has been eagerly anticipated by the crypto community for many years. Gemini co-founders, the Winklevoss twins, filed an application for the first spot BTC ETF-like trust back in July 2013 so the community has been eagerly awaiting this moment for a decade.

This might explain why BTC traders appear to have such a bee in their bonnet about this decision. Indeed, the launch of the first spot bitcoin ETF in Europe a couple of weeks ago barely moved the needle, while any news regarding the US version causes relatively significant price movements.

However, while bitcoin’s recent capitulation has awakened the bitcoin perma-bears, it’s worth noting the world’s largest cryptocurrency is still up 63% since November 2022 and is the best-performing asset this year. As such, some consolidation is entirely expected.

Grayscale’s victory against SEC briefly buoys crypto markets

On 29 August, crypto asset manager Grayscale Investments won its long-standing battle with the SEC, sending crypto markets soaring – albeit briefly. The US securities watchdog had rejected Grayscale's application to convert its Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF in June 2022.

However, US Court of Appeals Circuit Judge Neomi Rao ruled that the SEC didn’t “offer any explanation” of this decision and said the ruling had been “arbitrary and capricious”. The price of bitcoin soared on the news, nearly hitting $28,000 before dropping back down below $26,000 after the spot BTC delays.

While Grayscale’s victory could pave the way for a spot ETF approval in the future, it doesn’t guarantee this. Both parties now have 45 days to appeal the ruling, which could delay the verdict further. Even if the SEC doesn’t appeal, it could yet reject Grayscale’s application on other grounds following a fresh review.?

The Yield App View

Grayscale’s victory against the SEC marks a step in the right direction, but it is certainly not a panacea. This, perhaps, explains why the market’s euphoric reaction was relatively short-lived.?

In particular, the SEC’s delay of its final ruling on the swathe of spot BTC applications sitting on its desk indicates that the watchdog is ready to play the long game. This will only prolong the uncertainty, and as any seasoned investor knows, markets don’t tend to favor this scenario.

Even if Grayscale prevails in its victory (i.e. if the SEC chooses not to appeal), there is still a long way to go before a potential approval. If one is forthcoming, it is likely that all spot bitcoin ETFs will be approved in one go.?

As such, the final decision could be a long way off and it’s worth preparing for market volatility until then. An approval, if it does come, could send crypto into the fully-fledged bull run investors have been waiting for.

Uniswap’s securities lawsuit win sets precedent for DeFi protocols

On 30 August, leading decentralized exchange (DEX) Uniswap secured a victory in a class action lawsuit that claimed it had sold unregistered securities.?

The suit, filed by a group of investors in April 2022, alleged that Uniswap should have registered as an exchange or broker-dealer. The investors alleged they had suffered losses through purchases of scam tokens on Uniswap.

However, the Southern District Court of New York (SDNY) dismissed the class action. The court ruled that, due to its decentralized nature, the exchange cannot be held liable for any damage caused by third parties misusing the protocol.?

As a DEX, Uniswap cannot control which tokens are listed by third parties. Judge Katherine Failla said, “this case is more like an effort to hold a developer of self-driving cars liable for a third party’s use of the car to commit a traffic violation or to rob a bank”.

The Yield App View

Uniswap’s case marks a win for the crypto industry as it sets an important precedent for future cases involving DeFi protocols. It provides much needed clarity around how US securities law applies to DeFi and the ruling can be used as an argument should similar accusations emerge in the future.

However, since the lawsuit wasn’t large enough to affect Uniswap’s operations, its dismissal didn’t appear to have any effect on the price of its native token, UNI. In fact, since then, UNI has traded lower, currently down 7.2% over the last week (as of 5 September 2023) and 32% over 12 months. The DEX itself has also suffered a steady slowdown in on-chain activity in recent months.

Overall negative sentiment and concern over global economic conditions could be to blame for this lackluster performance. Altcoins tend to perform strongly during bull markets, but current market conditions remain shaky.?

Once leading cryptocurrencies like bitcoin and ether rebound from current levels and resume their climb, we’re more likely to see a turnaround in the performance of altcoins – though, of course, it will also depend on an individual project’s fundamentals.

Disclaimer:?

The content of this newsletter does not constitute financial advice and is for informational purposes only. The price of digital assets can go down as well as up, and you may lose all of your capital. Investors should consult a professional advisor before making any investment decisions.