Some of the largest retail brokers in the country are gearing up to provide local investors with access to Bitcoin spot price ETFs, following their approval by the Securities and Exchange Commission (SEC).
This green light, eagerly awaited for these somewhat controversial products, is expected to spark increased interest in cryptocurrencies. Reports from local exchanges indicate that trading volumes for Bitcoin and other currencies saw a more than twofold increase on Thursday, despite prices holding steady. Thanks to the SEC decision, a major financial players like BlackRock, Grayscale, VanEck, Franklin Templeton, and Fidelity, among others, can now issue securities tied to the price movements of the 15-year-old cryptocurrency.
The anticipated spot ETFs are poised to commence trading on both the New York Stock Exchange and Nasdaq on Thursday night.
What is a Bitcoin ETF?
A Bitcoin ETF is essentially a pooled security that mirrors the price indexes of various assets, similar to traditional ETFs tracking commodities. Much like mutual funds, it lets investors benefit from the price movements of its underlying assets without the need for direct interaction. The allure of a Bitcoin ETF lies in its potential to allow regulated entities to indirectly invest in BTC, sidestepping the complexities of handling the cryptocurrency itself. Unlike mutual funds, ETFs are freely tradable on stock exchanges.
Why does it matter?
Well, until now, most regulated financial entities couldn’t easily invest in Bitcoin, limiting its reach to a relatively niche market. The introduction of the first ETF changes that narrative, granting IRAs, 401Ks, pension funds, and major institutional players the opportunity to invest in BTC. This opens the door for mass adoption on an unprecedented scale.
What did the SEC actually approve?
According to SEC Release No. 34-99306, the following 11 spot bitcoin ETFs have been granted accelerated approval:
- NYSE Arca: Grayscale Bitcoin Trust, Bitwise Bitcoin ETF, Hashdex Bitcoin ETF
- Nasdaq: iShares Bitcoin Trust, Valkyrie Bitcoin Fund
- Cboe BZX Exchange: ARK 21Shares Bitcoin ETF, Invesco Galaxy Bitcoin ETF, VanEck Bitcoin Trust, WisdomTree Bitcoin Fund, Fidelity Wise Origin Bitcoin Trust, Franklin Bitcoin ETF
The SEC hopes that by approving this many Bitcoin ETFs all at once, it will help create a “level playing field” in the market which would promote “fairness and competition” thus “benefiting investors and the broader market”.
Will the approval of ETFs be good or bad for Bitcoin?
The approval of Bitcoin ETFs could be positive for the cryptocurrency. With close to $8 trillion invested in global ETFs, Bitcoin gains exposure to a wider investor base and increased credibility as a valid asset. Big institutional investors, previously restricted from direct Bitcoin investments, can now participate through ETFs. Smaller investors also benefit from the convenience of investing in Bitcoin via stock accounts without dealing with crypto wallets.
Is an Ethereum ETF next?
A “buy the rumor, sell the fact” scenario, in which certain investors profit from the anticipation-driven price increase, is a worry that the approval might bring about. Furthermore, increasing Bitcoin’s accessibility through ETFs may make it more volatile, particularly during bear markets.
The essay makes predictions about the future, including the potential for an Ethereum ETF. Ethereum might develop similarly to Bitcoin exchange-traded funds (ETFs), as it is frequently regarded as the next big thing in decentralized finance (DeFi). The report implies that exchange-traded funds (ETFs) on other well-known cryptocurrencies, such as Ethereum, are inevitable, even though the approval procedure might take some time, despite the SEC’s emphasis that only “non-security” Bitcoin is now approved.