Five Things to Know in Crypto This Week: SEC Legal Challenges and Crypto ETFs

US BTC-Spot ETF Market Sees Second Week of Total Net Outflows

The US BTC-spot ETF saw total net outflows of $105.9 million (excl. Friday flow data for iShares Bitcoin Trust), marking the second consecutive week of outflows. Uncertainty about the Fed interest rate trajectory affected buyer demand for US BTC-spot ETFs.

Significantly, the US BTC-spot ETF market faced the possibility of six consecutive days of total net outflows.

According to Farside Investors,

• Grayscale Bitcoin Trust (GBTC) had total net outflows of $152.6 million in the week ending June 21. The previous week, GBTC saw total net outflows of $274.3 million.
• Fidelity Wise Origin Bitcoin Fund (FBTC) reported total weekly net outflows of $271.0 million after outflows of $146.3 million the previous week.
• ARK 21Shares Bitcoin ETF (ARKB) and Bitwise Bitcoin ETF (BITB) had total weekly net outflows of $78.8 million and $35.6 million, respectively.
• However, iShares Bitcoin Trust (IBIT) could buck the trend for the second week, with total weekly net inflows of $1.5 million (excl. flow data for Friday). In the week ending June 14, IBIT saw total net inflows of $41.6 million.

While the US BTC-spot ETF market saw more outflows, the US ETH-spot ETF market grabbed the crypto headlines.

ETH-Spot ETF Issuers File S-1 Amendments and Await SEC Final Approval

In a flurry of activity, the remaining US ETH-spot ETF issuers filed their S-1 amendments on Friday, June 21.

ETF Store President Nate Geraci shared the news on X (formerly Twitter), posting,

“All spot eth ETF S-1 amendments are IN… Bitwise, Fidelity, 21Shares, Grayscale, Franklin, VanEck, iShares, & Invesco. Known fees so far are Franklin (0.19%) & VanEck (0.20%). Now we wait for the SEC.”

ETH avoided a pullback on Friday, with news of the S-1 amendment filing providing support. Nevertheless, uncertainty lingers about the likely demand for US ETH-spot ETFs.

Bloomberg Intelligence Senior ETF Analyst Eric Balchunas stood by his previous projection, saying,

“Thank you for all the reminders that I once referred to eth spot ETFs as “small potatoes” In hindsight, that was too dismissive, I take it back. That said, I do still think eth will be lucky to get 20% of the aum btc etfs have. We’ll see tho..”

Considering projected demand, relative to BTC ETFs, unexpectedly high demand for US ETH-spot ETFs could fuel the next ETH bull run.

ETH was down 2.73% to $3,534 from Monday to Friday, well below the November 2023 ETH-spot ETF market-hyped high of $4,870.

SEC vs. Ripple Case: Former SEC Official Plays Down Appeal Threat

Investors awaited the court verdict from the SEC vs. Ripple case. On Friday, June 14, the SEC filed its response to the Ripple Notice of Supplementary Authority, bolstering its proposal of a $10 million penalty for breaching US securities laws.

The SEC referred to the Ripple calculations from the Terraform Labs settlement, stating that the penalty floor Ripple would be $102.6 million and not $10 million.

However, $102.6 million was substantially below the $2 billion the SEC initially argued for in its remedies-related opening brief. The SEC response was not a settlement offer but highlighted the unreasonableness of their push for $2 billion and an injunction.

While investors considered the possible outcome of the case, the crypto community discussed the prospects of an SEC appeal. The crypto market expects the SEC to appeal against the Programmatic Sales of XRP ruling. In July 2023, Judge Analisa Torres ruled that programmatic sales of XRP do not satisfy the third prong of the Howey Test.

Pro-crypto lawyer Jeremy Hogan commented on an interview with former SEC Division Chief Kristina Littman, saying,

“Sound logic. Plus remember that even if the SEC ‘wins’ the appeal, the case just comes back down to the trial court for further factual determinations. There is no final glorious victory for the SEC up in the 2nd Circuit, just the potential for disaster.”

Kristina Littman had this to say about the chances of an SEC appeal,

“I think there’s some speculation the SEC might just let the Ripple opinion stay there as a district court opinion and not risk elevating to a circuit level where they could potentially illicit bad law when they have otherwise favorable rulings in the aftermath of the Ripple litigation.”

An end to SEC plans to appeal against the Programmatic Sales ruling could signal an XRP return to $1.00. XRP rallied to a July 13 high of $0.9327 in response to the Programmatic Sales ruling before reacting to the threat of an SEC appeal.

From Monday, June 17, to Friday, June 21, XRP was up 0.16% to $0.4899.