The US Securities and Exchange Commission (SEC) has authorized the first US-listed exchange-traded funds (ETFs) to follow Bitcoin, marking a watershed moment for the world’s largest cryptocurrency and the wider crypto sector.
The announcement comes after a rollercoaster 24 hours for the popular cryptocurrency, which saw a tweet from the Securities and Exchange Commission (SEC) account announcing the approval of the long-awaited ETFs on 9th Jan, causing the price of Bitcoin to skyrocket by over $1,000. Shortly after, the SEC announced that its account had been “compromised” and that the tweet was “unauthorized.”
The @SECGov twitter account was compromised, and an unauthorized tweet was posted. The SEC has not approved the listing and trading of spot bitcoin exchange-traded products.— Gary Gensler (@GaryGensler) January 9, 2024
By Jan 10th, however, the SEC had officially authorized the ETFs, albeit remaining skeptical about cryptocurrency.
What’s been Acknowledged?
The SEC has approved 11 Bitcoin ETFs in the United States, making cryptocurrencies accessible to many new investors who do not want to go through the additional processes required to purchase genuine Bitcoin.
- Blackrock’s iShares Bitcoin Trust (IBIT)
- ARK 21Shares Bitcoin ETF (ARKB)
- WisdomTree Bitcoin Fund (BTCW)
- Invesco Galaxy Bitcoin ETF (BTCO)
- Bitwise Bitcoin ETF (BITB)
- VanEck Bitcoin Trust (HODL)
- Franklin Bitcoin ETF (EZBC)
- Fidelity Wise Origin Bitcoin Trust (FBTC)
- Valkyrie Bitcoin Fund (BRRR)
- Grayscale Bitcoin Trust (GBTC)
- Hashdex Bitcoin ETF (DEFI)
An ETF is a simple method to invest in assets or a portfolio of assets without having to purchase the assets directly. For example, the SPDR Gold Shares ETF allows anybody to invest in gold without needing to find or secure a physical bar.
ETFs are also readily tradeable on stock markets.
Since Bitcoin’s introduction, anybody desiring to possess one has had to either adopt a digital wallet or register an account with a crypto trading site such as Binance or Coinbase.
Cryptocurrency enthusiasts believe the discovery will propel the once-obscure and arcane corner of the internet even deeper into the financial mainstream.
The decision to approve the ETFs is a significant triumph for large fund managers such as BlackRock, Fidelity Investments, and Invesco, who will manage the funds and have worked hard to urge the SEC to approve them.
Some items are scheduled to start retailing as early as 11th Jan sparking a strong battle for market dominance.
Victory After Years of Struggle
Spot Bitcoin ETFs are now eligible for listing on American stock exchanges alongside other listed assets. Retail investors may have direct exposure to cryptocurrencies through their brokerage accounts without having to open an account with a cryptocurrency exchange. Furthermore, an ETF avoids many of the risk factors involved with storing cryptocurrency directly on exchanges, such as hacking and fraud.
Some brokers permit users to invest in cryptocurrency through their brokerage accounts. Nonetheless, those investments are either independent crypto products, such as Robinhood Crypto, or offered through direct partnerships with crypto exchanges, such as Interactive Brokers and Paxos.
While corporations waited years for the spot Bitcoin ETF to be approved, Bitcoin and Ether ETFs related to futures contracts are already trading on the Chicago Mercantile Exchange.
Although the US regulator takes years to authorize a spot Bitcoin ETF, numerous nations have already listed the product. Other than the United States, spot Bitcoin ETFs are listed in eight countries, including Canada, Germany, Jersey, Switzerland, and Australia.
What did the SEC Declare?
Despite allowing the new ETFs, the SEC stated that it remains profoundly wary about cryptocurrencies and that its decision does not indicate that it accepts or encourages Bitcoin.
“Investors should be careful about the various dangers involved with Bitcoin and crypto-related goods,” said Gary Gensler, the agency’s head.
Other commissioners voiced concern that the SEC had agreed to authorize the money.
“I am worried that these products will overflow the markets and land directly in the pension funds of US citizens who cannot afford to lose their money to the fraud and manipulation that appears to be common in the spot Bitcoin markets,” Commissioner Caroline Crenshaw stated in her dissent.
What does this Imply for the Value of Bitcoin?
Following nearly two years of instability that saw the price of Bitcoin collapse and the demise of numerous crypto businesses, Wednesday’s decision will come as welcome news to many investors in the crypto market.
The authorities’ approval had been expected for several months, and the price of Bitcoin has risen by around 70% since October, as crypto speculators predicted that widespread usage of Bitcoin ETFs would increase demand for the cryptocurrency.
Following the insolvency of the cryptocurrency exchange FTX, the price fell as low as $16,000 in November 2022. It traded at $46,500 in the hours following the SEC’s disclosure.
Standard Chartered analysts warned this week that the ETFs might bring in $50 billion to $100 billion this year alone, eventually pushing the price of Bitcoin above $100,000. Others believe inflows will be closer to $55 billion over five years.
Other experts have been more cautious in their projections, claiming that ETFs may help stabilize cryptocurrency values by increasing their use and potential audience.
Most, however, are afraid that the widespread usage of crypto ETFs would introduce too much risk and volatility into Americans’ retirement funds; the price of Bitcoin is known to vary dramatically, frequently without notice or reason.
Yiannis Giokas, senior director of Moody’s Analytics, “warns that Bitcoin’s price volatility could lead mainstream investors to new investing risks.”
The value of Ethereum, the second-most popular cryptocurrency, has also increased on predictions that fund managers could launch ETFs based on it.
Spot BTC ETFs, on the other hand, are far from an ideal solution for the whole crypto business, since new crypto laws and better regulatory clarity would still help the US in terms of development and acceptance. However, the ETF’s acceptance signifies a possible milestone moment in attitudes toward Bitcoin.