SEC Approved Launch of First 11 Bitcoin ETFs: Future Outlook and Impact on the Crypto Market
The United States Securities and Exchange Commission (SEC) has officially approved the launch of the first 11 ETFs directly investing in Bitcoin, as stated in an order on its website.
In particular, the regulator granted permission to trade shares of the following funds: Grayscale Bitcoin Trust, Bitwise Bitcoin ETF, Hashdex Bitcoin ETF, iShares Bitcoin Trust, Valkyrie Bitcoin Fund, ARK 21Shares Bitcoin ETF, Invesco Galaxy Bitcoin ETF, VanEck Bitcoin Trust, WisdomTree Bitcoin Fund, Fidelity Wise Origin Bitcoin Fund, and Franklin Bitcoin ETF.
Unauthorized Social Media Post Affects Bitcoin ETF Approval
The incident occurred after an unidentified individual gained unauthorized access to the SEC's account on social network X (formerly Twitter) and posted information about the regulator's approval to launch such ETFs. However, it was later deleted and replaced with a message stating that the account had been hacked and that the Commission had not approved the launch of the ETF. The head of the SEC, Gary Gensler, also confirmed that the Commission's account had been hacked.
About a day later, it was announced that the SEC had still given the ETF a positive decision.
According to MarketWatch, the approval of spot Bitcoin ETFs may bolster the value of this cryptocurrency. On January 11, they fell by 0.1%. After official news from the SEC the day before, the price remained almost unchanged. Following the earlier publication of an unauthorized entry in X, they increased by more than 2%.
What Does the Spot Bitcoin ETF Entail?
The Bitcoin ETF has been a popular topic for discussion in the cryptocurrency community for several months. The anticipation of its potential launch was likely a major factor in the recent surge in Bitcoin's value because of the additional liquidity that Bitcoin ETFs are bringing to the cryptocurrency market. Here is why:
A Bitcoin exchange-traded fund (ETF) is a type of fund that invests solely in Bitcoin. Cryptocurrency ETFs track the prices of cryptocurrencies and invest in their asset portfolios. They are traded on exchanges and investors can hold them in standard brokerage accounts. By purchasing shares in these funds, investors can profit from the growth of the Bitcoin exchange rate through an intermediary company that invests in cryptocurrencies.
What Impact Could Bitcoin ETFs Have on the Cryptocurrency Market?
The process of buying and selling ETFs on exchanges is similar to investing in stocks but the key difference is that a stock represents the security of one company, whereas an ETF can contain a basket of assets. It also allows investors to avoid direct investments: the buyer of the fund's shares invests money in a portfolio of assets rather than in a specific asset. This loophole enables investors to bypass legal restrictions in countries where cryptocurrency use is prohibited.
Market experts believe that the launch of these ETFs will ease the adoption process for mainstream investors, potentially attracting significant capital into the market and bringing billions of dollars into the market as investors seek exposure to Bitcoin through a trusted and traditional financial instrument.
The approval of the ETFs is also expected to have an impact on the gold market, as it could take some investment interest away from gold and lead to a shift in capital allocation.
SEC's Decision and Market Reaction
The U.S. Securities and Exchange Commission recognized applications from 11 funds as valid on January 11. Their Bitcoin-linked shares are traded on the New York Stock Exchange (three funds), Nasdaq (two funds), and Chicago Board Options Exchange (CBOE). Exchanges are allowed to start trading securities on January 12. Issuers' commissions range from 0.2% to 1.5%, and some funds also offer fee-free shares for a limited time.
Approval from the SEC followed years of postponement and outright refusal in numerous attempts to launch Bitcoin ETFs. For the first time, an application to open such funds was submitted in 2013. Interestingly, the green light was given just a few months after the U.S. Securities and Exchange Commission suffered a resounding defeat in the court. In August 2023, the District of Columbia Circuit Court of Appeals ruled that the SEC had acted "arbitrarily and biased" in rejecting Grayscale's attempt to convert its Grayscale Bitcoin Trust (GBTC) fund, valued at about $26 billion, into a spot Bitcoin ETF.
Proponents of spot Bitcoin ETFs have long argued that regulated securities linked to the original cryptocurrency will enable institutional and retail investors to track Bitcoin price movements without needing to create cryptocurrency wallets or invest directly in digital assets. The ETF shares will be available to any American investor with a brokerage account.
Approval is considered a significant milestone for the cryptocurrency market, as analysts are optimistic about potential investment inflows and the institutionalization of Bitcoin as an asset class. Approval has also led to a surge in the price of Bitcoin, with the cryptocurrency soaring by more than 70% in recent months in anticipation of ETFs.
Future Outlook
The approval of Bitcoin ETFs is expected to have a lasting impact on the cryptocurrency market and broader investment landscape. Approval is expected to generate greater institutional interest in Bitcoin and contribute to its broader adoption. However, some experts have also expressed concerns about the high volatility and risks associated with Bitcoin ETFs. The market closely monitors development following approval.
What Risks are Associated With Bitcoin ETFs?
Despite the potential benefits, investors should remain cautious about the risks associated with Bitcoin and cryptocurrency-related products. The notorious price volatility of Bitcoin, as well as its fluctuating value against stablecoins and other cryptocurrencies, could expose mainstream investors to a less familiar range of investment risks. The SEC has expressed deep skepticism about cryptocurrencies, stressing the need for caution due to the myriad risks associated with Bitcoin and related products.
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