The US Securities and Exchange Commission has reiterated its decision to reject Grayscale’s application to convert its Bitcoin Trust into a spot Bitcoin ETF. In June this year, the SEC rejected Grayscale’s initial request to convert the Bitcoin trust into an ETF. In both instances, the regulatory body has cited that such products tied to Bitcoin could be susceptible to fraud and manipulation.

After the first rejection, Grayscale immediately sued the SEC accusing the regulator of violating the Administrative Procedure Act and the Securities Exchange Act of 1934 through its arbitrary and discriminatory treatment of the Bitcoin-related ETFs. Grayscale added that SEC’s actions were ‘in excess of the Commission’s statutory authority, flawed and has been inconsistently applied with a ‘special harshness’ to spot Bitcoin ETFs.’

Bitcoin Futures ETFs Should Be Treated Differently

In its first response to the lawsuit, the SEC filed a brief last week repeating its view that spot Bitcoin ETF lacked the federal oversight available in Bitcoin Futures ETFs. The SEC claims that the Chicago Mercantile Exchange closely monitors Bitcoin Futures ETFs.

The regulatory body also argued that Bitcoin futures and spot ETFs should be treated differently due to the risks they pose to investors. The SEC requested the Washington DC appeals court, where the Grayscale lawsuit is filed, to uphold its initial decision of rejecting the request to convert the Bitcoin Trust into a spot ETF.

According to court documents, Grayscale has until January 13th to respond to the SEC’s brief.

Bitcoin Dips Below $17k, Erasing All Weekly Gains

News of the SEC restating its stance on rejecting Grayscale’s spot Bitcoin ETF application coincided with BTC dropping to $16,918, thus erasing all its weekly gains.

The one-day BTC/USDT chart below shows that Bitcoin is again in bear territory below the 50-day moving (red) average. Its daily RSI (red), MACD and MFI (green) hint at a reversal of fortunes that could lead to a drop to the recent low of $15,476 in late December or early January.

To maintain a bullish narrative, Bitcoin must confidently reclaim the $17,622 support zone, which served as a previous local low before the FTX fiasco of November.

(By John P. Njui)