A New Chapter: The Approval of Spot Bitcoin ETFs
by Cloudwall - 15 Jan 2024
“Tomorrow Bitcoin Goes Public” - Michael Saylor
In a groundbreaking move, the U.S. Securities and Exchange Commission (SEC) recently approved 11 spot Bitcoin exchange-traded funds (ETFs).
This comes a day after an unauthorized individual gained access to the SEC’s X account and published a fake ETF approval announcement. Despite the misinformation, the move was finalized and has taken the cryptocurrency market by storm.
An ETF is an easy way to invest in assets or a group of assets without having to directly buy the assets themselves. In this case, a spot Bitcoin ETF holds bitcoin as their primary asset and tracks the cryptocurrency's price movements. This structure allows investors to gain price exposure to Bitcoin without the need to directly own the asset.
In this post, we will explore the historical background leading up to this approval, evaluate its immediate impact, and discuss the long-term implications of spot Bitcoin ETFs.
Background Explaining The Approval
The journey towards approving spot Bitcoin ETFs has been a rocky one. It began in 2013 when an entity linked to the Winklevoss twins (Cameron Winklevoss & Tyler Winklevoss) submitted the first Bitcoin ETF application, “Winklevoss Bitcoin Trust”, to the SEC. Over the years, various applications faced rejection, primarily due to the risk concerns over the unregulated nature of Bitcoin.
The landscape started shifting in 2021 when Bitcoin ETFs based on futures products gained approval. However, spot-based Bitcoin ETFs remained elusive until BlackRock's application in June of the same year prompting a change in the SEC's stance. The involvement of industry giants like Fidelity and Invesco played a pivotal role due to their significance in the U.S. financial system.
Impact of The Approval
The approval of the 11 Bitcoin ETFs is expected to drive a higher volume of institutional adoption. For the 11 ETFs in questions, here's a quick breakdown:
- ARK 21Shares Bitcoin ETF (ARKB)
- Bitwise Bitcoin ETF (BITB)
- Fidelity Wise Origin Bitcoin Fund (FBTC)
- iShares Bitcoin Trust (IBIT)
- Invesco Galaxy Bitcoin ETF (BTCO)
- Valkyrie Bitcoin Fund (BRRR)
- Wisdomtree Bitcoin Trust (BTCW)
- Franklin Bitcoin ETF (EZBC)
- Grayscale Bitcoin Trust (GBTC)
- Hashdex Bitcoin ETF (DEFI)
- VanEck Bitcoin Trust (HODL)
Source: Decrypt. Accurate as of 12/01/2024.
Hedge funds, other institutional investors and even retail investors traditionally cautious about entering the crypto realm, are more likely to participate due to the regulated and familiar investment structure provided by ETFs. This accessibility is expected to broaden the appeal of Bitcoin, driving increased demand which potentially contributes to a rise in its price.
The approval of spot Bitcoin ETFs had a palpable impact on cryptocurrency markets even before the official announcement. For instance, the price of Bitcoin surged over 7% when media outlets reported that SEC approval was imminent. This anticipation underscores the significance of this regulatory green light.
Furthermore, the approval also causes speculation about the outlook on other crypto assets. For instance, with the acceptance of spot Bitcoin ETFs, Ethereum seems to be the next most likely candidate for ETF approvals. However, due to uncertainty stemming from the SEC, only time will tell whether Ethereum’s ETF approval becomes a reality.
One fact is certain; the adoption of Bitcoin ETFs opens doors for a more inclusive investment landscape, enticing the broader financial market to integrate the digital asset ecosystem. It signals the next chapter in the story of cryptocurrency and digital assets; a step forward for the Blockchain Economy.
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