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Mid-Week Reality Check: Is the Grayscale and X Hype Warranted?




Inconvenient or outright bad news can spread like wildfire, changing the sentiment surrounding entire markets.  Over the years, this has been commonplace within a digital asset sector rife with volatility.  However, this works both ways, with yesterday being a prime example of how potentially good news can spread quickly, changing market sentiment at a moment's notice.  Based on social media, though, a mid-week reality check may be needed to reign in some of the excitement.  The following is a brief look at the two storylines that have been circulating as of late, and why sunshine and roses are not a sure thing.

A Grayscale ETF Has NOT Been Approved

In a hotly anticipated verdict, courts presiding over Grayscale vs. SEC sided in favor of the former.  This has resulted in many believing that the company's application to convert its GBTC Trust into a Spot-Bitcoin ETF, which was denied by the SEC only to now be overturned, allows for the conversion to occur.  This was simply not the case.

While the verdict was most definitely a resounding win for Grayscale and the looming mainstream adoption of digital assets like Bitcoin, the courts simply found that the SEC did not adequately explain or prove its reasoning behind its denial, agreeing that its past actions were both ‘arbitrary and capricious'.  With this being the case, the Grayscale application will simply re-enter the growing queue of similar products for re-evaluation.

“The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP. In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful. We therefore grant Grayscale’s petition for review and vacate the Commission’s order.”

Much has been made about this development, pointing to a bulk approval of multiple applications this week. However, the SEC may full well opt to continue delaying the approval of such products for as long as possible.  This means potentially waiting until early 2024 before a final yay or nay is required.

The bottom line is that with this ruling, approving a Spot-Bitcoin ETF is looking more likely than ever before.  It is important to recognize that this has not yet occurred, and may not for some time – if ever.

Notably, this loss marks the second such result experienced by the SEC in as many months, with the divisive regulator having also failed to prove its assertions against Ripple in court.

X's Intentions Are Not Clear

Another development yesterday, which saw X (formerly Twitter) awarded a currency-transmitter license in the State of Rhode Island, has been painted as a move showing the company's progress towards the integration of digital assets in its platform.  This may be the case, but at this point, it is purely speculation.

While X already holds money transmitter licenses in various other States, these are specific to assets deemed money (i.e., FIAT).  Although a currency transmitter license may extend to include digital assets, the company has not indicated that it was attained for this purpose.

As it stands, we know that X is set to transition to an ‘everything-app', with the company already having said as much. Also, these licenses only represent a small portion of the United States and do not directly point to any immediate integration of digital assets.

Like the ruling on Grayscale vs. SEC, it is difficult to deny the path that X appears to be headed down, but for the time being, prudence is a practical approach.

Final Word

The bottom line is, with both of these developments – don't count your chickens before the eggs hatch.  There are no guarantees that either will amount to anything positive, regardless of shifting sentiment.  Plan for the worst, and hope for the best.

Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology.