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Goldman Sachs and J.P. Morgan Enter the Race: A Game-Changer for Bitcoin ETF Approval


Bitcoin and other digital currencies have taken the world by storm, with investors of all stripes starting to take a hard look at the asset class. And with interest, exchange traded funds (ETFs) are sure to follow. But given some of the negative connotations with the asset class, the SEC has been slow to approve any such ETFs that track spot Bitcoin prices.


But that hasn’t stopped the race from heating up.


The latest entrants are Goldman Sachs and J.P. Morgan. Looking to become a so-called authorized participant, one of the most important jobs when it comes to the ETF structure, the duo have thrown some real legitimacy into the spot Bitcoin ETF race. And with some of Wall Street’s biggest investment banks backing these funds, approval may be at hand.

A Long Drawn-out Race


While the mania phase of digital currencies has died down, the asset class is still alive and well. Bitcoin and others have become more mainstream and are moving toward their goal of becoming an actual medium for exchange. To that end, more conservative and mainstream investors have seriously begun the process of adding the asset class to their portfolios. And like many assets, ETFs are quickly getting the nod as a preferred vehicle for holding.


The problem is those vehicles that track spot prices don’t yet exist. So far, the only way to bet on physical Bitcoins without owning them directly remains the Grayscale Bitcoin Trust. The fund is technically a closed-ended fund (CEF) and not an ETF.


The SEC has approved several futures-based funds, like the ProShares Bitcoin Strategy ETF (BITO). However, futures and spot prices aren’t the same. One is current pricing; the other is looking into the distance. You can often find oil, corn, and gold showing differences in the two, leading to contango and backwardation.


As for spot prices, it’s been a quagmire of red tape. Many approvals have sat dormant, while the SEC continues to kick the can on approving any such product.


Asset manager BlackRock came the closest to approval last summer with its filing for the iShares Bitcoin Trust. In addition to holding Bitcoin in a digital vault for investors, the fund’s added surveillance feature is designed to reduce the risk of fraud. That feature has been a key selling piece for the SEC and many rival firms—including VanEck, Valkyrie, Bitwise, Fidelity, WisdomTree, and a joint venture between Ark Investments and 21Shares —have added the language to their filings. According to Reuters, as of December 31, 2023, there were 14 different spot Bitcoin ETFs on the SEC’s approval list. 1

The Big Boys Step Up to Bat


Approvals of at least a few of these spot funds may be coming sooner rather than later. That’s because two other Wall Street heavyweights have thrown their names into the Bitcoin ETF ring.


We’re talking about Goldman Sachs and J.P. Morgan.


Both Wall Street titans aren’t looking to launch their own funds, but provide a very important step in the process: acting as an authorized participant or AP. APs are key to the creation and redemption mechanism that make ETFs tick. Remember, we buy and sell ETFs on the secondary market. But those ETF shares are created by APs who exchange assets or cash to physically start the ETF shares. Likewise, they accept assets back from the funds. Without APs, ETFs can’t function.


Bloomberg and other news sources broke the story that Goldman Sachs has been in talks with BlackRock and Grayscale to become the AP on their respective spot Bitcoin ETFs. J.P. Morgan has been talking to Grayscale and potentially BlackRock as well. J.P. Morgan is an AP for several of BlackRock’s other physically backed ETFs that track gold and silver. At one time, the pair were looking to launch a physical aluminum ETF as well.


ETF applicants are not required to disclose APs in their S-1 or S-3 filings. However, these two Wall Street firms entering the fray publicly and adding their stamp of approval on these funds could potentially give the SEC a nudge to OK. After all, if one of the most important banks and investment banks on the planet are willing to back the funds, they should work when it comes to structure. Moreover, it could give the nod to push other big firms to become APs as well. Some reports have swirled that the SEC is looking for each Bitcoin product to have five to ten APs for safety.


Analysts now predict approval odds for a spot Bitcoin ETF at 90%. 2

Good News for Investors


With Goldman and J.P. Morgan, we may very well see a spot Bitcoin ETF of size and substance sooner rather than later. The SEC has until January 10 to approve or deny the Ark/21Shares ETF. This was the first to file. However, the fund hasn’t announced its APs and still has a chance to be denied. Second, even if approved, larger institutional investors—who would be the main targets for many of these ETFs—may still choose the funds with bigger APs for safety reasons.


Either way, the fact that two Wall Street titans have now put their stamp on spot Bitcoin products is a major win for anyone looking to add Bitcoin to their portfolios. We may very well get an approval sooner rather than later.


In the meantime, as the deadlines draw near, there are plenty of Bitcoin products tracking futures, as well as fintech firms offering a chance to buy digital currency directly.

Bitcoin & Digital Asset ETFs


These funds were selected based on their exposure to digital assets through equities or futures. They are sorted by their total one-year total return, which ranges from 84% to 198%. They have expenses between 0.65% and 1.20% and have assets under management between $11M to $1.3B.


In the end, as more mainstream investment managers and banks begin to accept and enter the Bitcoin marketplace, it will get better for investors. Ultimately, the legitimacy of the asset class is growing. Wall Street’s moves and willingness to support these funds is proof of concept.

Bottom Line


Spot Bitcoin ETFs remain in limbo. However, they may just be moving forward, thanks to new moves by J.P. Morgan and Goldman Sachs to become authorized participants. With their involvement, Bitcoin ETFs gain much-needed safety and approvals are likely. That’s great news for investors.




1 Reuters (January 2024). Goldman in talks with BlackRock, Grayscale to be part of spot bitcoin ETFs


2 Token Post(January 2024). Grayscale Negotiating With JPMorgan, Goldman Sachs for Potential Spot Bitcoin ETF Roles