Bitwise, one of the leading digital asset managers in the U.S., recently made waves by filing an application for a spot XRP ETF on Wednesday, October 2, 2024. Despite the anticipation surrounding the filing, XRP’s price didn’t see an upward trend. Ripple’s XRP ended up following the broader crypto market’s downturn amidst geopolitical instability. Moreover, now the ETF approval uncertainty is weighing on the price
Overview of Bitwise, Grayscale’s XRP Venture
Hunter Horsley, CEO of Bitwise, described Ripple’s native token as an “enduring crypto asset that many investors want exposure to.” In addition, the XRP ETF filing signifies Bitwise’s continued expansion of crypto investment products.
This move by Bitwise comes shortly after another key player in the digital asset space, Grayscale, relaunched its XRP trust. Grayscale’s relaunch may hint at future plans to convert the trust into an ETF, similar to the company’s approach with its Bitcoin (GBTC) and Ethereum (ETHE) trusts.
Grayscale’s strategy often involves offering private placements first, with the potential to transition into ETFs later. Will Cai, Managing Director of Indices at Kaiko, emphasized the significance of these moves by major asset managers. He said, “It is encouraging to see established players like Grayscale and Bitwise continue to push for new products and accessibility for US investors.”
Bitwise XRP ETF Approval Odds
However, the regulatory environment surrounding a potential spot XRP ETF remains a major hurdle. Grayscale’s successful legal battle with the U.S. Securities and Exchange Commission (SEC) over the approval of a spot Bitcoin ETF set a precedent, but the case for XRP differs significantly.
Our latest Data Debrief is out now.
This week we looked at @BitwiseInvest‘s $XRP filing and the chances of approval. Read the report below 👇https://t.co/7OkvkvMK0Q pic.twitter.com/tQBaQruwNX
— Kaiko (@KaikoData) October 7, 2024
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In Grayscale’s argument, the approval of regulated Bitcoin futures ETFs on CME supported their case for a spot ETF. The court agreed for the same, however, no similar market structure exists for Ripple’s token, complicating matters for a spot XRP ETF approval.
As of now, the XRP futures market is limited to crypto exchanges such as Binance and Bybit, which do not fall under U.S. regulatory oversight. Additionally, XRP futures trading volume and open interest on these platforms saw a decline last week, further adding to the uncertainty.
Hence, the absence of a regulated futures market, combined with the fact that much of XRP’s trading activity takes place offshore, presents a significant challenge for any potential ETF based on XRP. As Cai noted, “Grayscale’s product cycle isn’t normally required for an ETF,” underscoring the complexity involved in converting crypto products into ETFs under current U.S. regulations.
Adding to the regulatory challenges is the ongoing legal battle between the SEC and Ripple Labs, the team behind the Ripple blockchain. The unresolved case adds another layer of uncertainty to Bitwise’s XRP ETF filing, making it unlikely that the SEC will approve the application under its current leadership.
The timing of the filing could be strategic. With the 2024 U.S. Presidential election approaching, Bitwise’s move may be seen as a hedge on the potential for more favorable regulatory outcomes if pro-crypto Republican candidate Donald Trump secures the presidency.
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Also Read: Report: No authority in the world can freeze XRP
