In a historic move, the United States Securities and Exchange Commission (SEC) has given the green light to the first group of Bitcoin exchange-traded funds (ETFs) in the country. This decision, announced by SEC Chair Gary Gensler, marks a significant moment for Bitcoin, the most prominent digital currency, and represents a major step forward for the cryptocurrency sector as a whole.
The SEC’s approval encompasses 11 applications from a variety of financial giants, including BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck. This development, eagerly anticipated for over a decade, signifies a pivotal shift for Bitcoin. It allows both institutional and retail investors to gain exposure to Bitcoin without the need to directly own the cryptocurrency, providing a substantial uplift to the digital asset industry, which has recently faced several challenges.
Analysts from Standard Chartered estimate that these Bitcoin ETFs could attract between $50 billion to $100 billion in investment this year, potentially propelling Bitcoin’s value to as high as $100,000. Other experts foresee a more gradual inflow of around $55 billion over the next five years.
Andrew Bond, Managing Director and Senior Fintech Analyst at Rosenblatt Securities, views this development as a considerable endorsement for Bitcoin’s role as an asset class. He believes that the approval of these ETFs will further enhance Bitcoin’s legitimacy in the financial world.
Following this announcement, Bitcoin’s value surged by 3%, reaching $47,300. The cryptocurrency has experienced a 70% increase in value in recent months, driven by the anticipation surrounding these ETFs, and recently reached its highest point since March 2022.
The competition among the newly approved spot Bitcoin ETFs is expected to be intense, with factors like fees and liquidity playing crucial roles. In a bid to attract investors, some issuers, including BlackRock and Ark/21Shares, have even lowered their fees, ranging from 0.2% to 1.5%. For some investors, particularly short-term speculators, the liquidity of these ETFs – their ability to be easily bought and sold at prices that reflect Bitcoin’s actual value – might be more critical than the fees.
Marketing efforts are also ramping up in anticipation of these ETFs. Firms like Bitwise and VanEck have already launched advertising campaigns to promote their Bitcoin offerings. Steven McClurg, Chief Investment Officer at Valkyrie, whose ETF received approval, remarked on the unprecedented nature of launching multiple similar ETFs on the same day.
This approval is a significant turnaround for the SEC, which had previously been hesitant to approve Bitcoin ETFs due to concerns over potential market manipulation. The decision also opens the door for further innovative cryptocurrency products. Jim Angel, Associate Professor at Georgetown’s McDonough School of Business, suggests that this could lead to the approval of additional crypto products, like spot ether ETFs.
The SEC’s change in stance was partly influenced by a federal appeals court ruling last year. The court found the SEC’s rejection of Grayscale Investments’ application to convert its Grayscale Bitcoin Trust into an ETF to be unjustified, prompting the agency to reconsider its approach. Gensler stated that approving these products represents the “most sustainable path forward” but cautioned that this does not imply an endorsement of Bitcoin, which he described as risky and volatile.
The crypto industry has warmly welcomed this development. Grayscale CEO Michael Sonnenshein expressed enthusiasm for democratizing access to Bitcoin through regulated U.S. investment vehicles. Cynthia Lo Bessette, head of digital asset management at Fidelity, highlighted the increased choice these products offer to investors interested in engaging with cryptocurrencies.
The approvals were announced shortly after a false post on social media suggested that the SEC had already greenlighted these ETFs. The SEC quickly refuted this claim and stated that it is working with law enforcement, including the FBI and its internal watchdog, to investigate the incident. Further adding to the confusion, the SEC briefly posted and then removed a notice on its website confirming the ETFs’ approval before finally reposting it.
by Steve Macalbry
Disclaimer: This article is intended for informational purposes only. It should not be considered financial or investment advice. We do not hold any form of equity in the securities mentioned in this article. Always consult with a certified financial professional before making any financial decisions.