Bitcoin has a new home on Wall Street. In a historic decision, the Securities and Exchange Commission (SEC) recently approved around a dozen spot bitcoin ETFs. SEC approval makes bitcoin easier to buy for mainstream investors.
Although this approval is positive for the evolution of bitcoin, the impact on prices and market dynamics will be a gradual process. This move brings major players like BlackRock, Fidelity, and others into the digital asset space.
Here’s what you need to know about Bitcoin ETF approval.
Understanding the Current Landscape
To understand the significance of this ruling, it’s important to begin with a bit of history. The crypto market has been waiting for spot Bitcoin ETF approval for a long time.
There have been numerous attempts to establish spot Bitcoin ETFs since 2013. All of these submissions were denied. Bitcoin’s allure lies in its unique function compared to typical investment instruments.
Before this approval, investors could gain exposure to this cryptocurrency indirectly through trusts or futures ETFs. However, these options have limitations.
Although functional, futures ETFs cannot mirror Bitcoin’s performance precisely since they rely on derivative contracts to project future movements. The issue with trusts is that their managers can’t engage in direct buying and selling of Bitcoin to rebalance the funds.
The approval of spot bitcoin exchange-traded funds allows sponsors to transact bitcoins directly. This provides a direct alignment between Bitcoin’s actual market value and the ETF price.
What Can You Expect?
Cryptocurrency bulls are pretty excited about the approval. They believe Bitcoin may surge to over $100,000 in 2024. The approval of Bitcoin ETF will help diversify and broaden the range of cryptocurrency investors.
Although Bitcoin’s price hasn’t moved much since news of the approval came out, this is expected to change rather quickly. ETFs and other crypto developments will help to drive the popularity and upward movement of Bitcoin.
What Is a Bitcoin ETF?
ETFs let retail investors hold Bitcoin indirectly via shares traded on stock exchanges. Investors are excited that token acceptance will shift the landscape, allowing more institutions like Fidelity, BlackRock, Franklin Templeton, and others to offer these products.
ETF products will be listed on registered national securities exchanges. These exchanges have rules in place to prevent manipulation and fraud.
The SEC investigates fraud and manipulation in the securities market, including schemes involving social media platforms.
There are several ETFs that are approved to begin trading. Some spot Bitcoin ETFs and tickers include:
- BlackRock IBIT
- Fidelity FBTC
- ARK/21 Shares ARKB
- Franklin Templeton EZBC
- Bitwise BITB
- Grayscale GBTC
- Valkyrie BRRR
- Incestò/Galaxy Digital BTCO
- VanEck HODL
- Wisdom Tree BTCW
Where We Are Today
In June 2023, one of the nation’s largest asset managers, BlackRock, made headlines when it applied to sponsor spot Bitcoin ETF. Other firms followed, wanting to get in on the renewed interest in bitcoin.
The SEC reviewed the applications individually and approved several at once to avoid giving any company a head start over the others. The list of approvals was impressive, including BlackRock bitcoin ETF, Invesco bitcoin ETF, Fidelity bitcoin ETF, and more.
All the applications were similar with some minor distinguishing factors, such as varying redemption options or lower fees. They all shared one main feature, the ability for companies to actively buy and sell Bitcoin. This ensures the effective tracking of market value and the efficient balancing of funds.
Better Price Tracking
Spot bitcoin ETFs allow investors to better track Bitcoin prices. This is important because cryptocurrency is volatile, and swings in price are quite common.
Currently, Bitcoin is trading at $48,000, off a 52-week low of $17,474 from last January. For comparison, bitcoin hit a record high in November 2021 of $62,802.
More Investment Options
Before ETF approval, investors were required to open accounts with a crypto exchange such as Coinbase or a trading platform like Robinhood. Now, investors can buy ETFs through their brokerage accounts or traditional brokerage accounts. Investors still have the option of using crypto exchanges or platforms.
The decision to allow ETFs is a huge win for fund managers like Investco, BlackRock, and Fidelity. These major players have pushed hard for SEC approval and can now reap the benefits.
More Investors
Investing in Bitcoin should also be easier for financial advisors and their clients. There are retail investors who directly invest in Bitcoin. The new ruling will open the field for other financial advisors who take direction from their clients and financial institutions.
The availability of spot bitcoin ETFs opens investment access to a wide array of players in the investment industry. It opens the floodgates to more competition.
When crypto is more democratized and cheaper for investors, interest in crypto investing is likely to soar.
What Does the SEC Say About Bitcoin ETF Approval?
Despite the new ETF approval, the SEC remains cautious and skeptical about cryptocurrency investment. The new decision does not mean they approve or endorse Bitcoin.
They want investors to remain cautious about the risks of crypto investment. They worry about these products flooding the market and investors losing money they cannot afford to lose.
What Does the ETF Approval Mean for Bitcoin Pricing?
After two years of uncertainty and turmoil with failing crypto firms and plummeting prices, the news of ETF approval comes as good news to many crypto investors. Investors have anticipated and hoped for the green light from regulators for many months.
During this time, Bitcoin has jumped around 70% in price. This is due to speculation that a broader use of Bitcoin would drive up the demand for the cryptocurrency.
With the prediction of a possible $100,000 high this year, investors are understandably excited. Some analysts are a bit more cautious and predict that ETFs will stabilize prices and broaden the use of Bitcoin and its potential audience.
Some worry about the potential risk and volatility of retirement accounts if Bitcoin is broadly used. These concerns center around the volatility and fluctuation of Bitcoin prices.
Is This Different to Purchasing Bitcoin Outright?
Yes, there’s a big difference. Spot Bitcoin ETFs allow investors to gain insight into the price of Bitcoin without the risks and complications of owning the cryptocurrency directly.
This includes having to set up crypto accounts and wallets with a crypto exchange. Some of these firms are prone to hacks and have poor cyber security in place.
The crypto industry has experienced a hard few years with a string of scandals and bankruptcies, including the downfall of the exchange FTX. Some exchanges have faced accusations of flouting U.S. securities laws.
In short, it’s given the crypto industry a questionable reputation. All of these scandals have made many investors wary of crypto investment.
The new ruling turns the tables, however. ETFs are included on highly regulated stock exchanges. They’re accessible through existing brokerage accounts and closely monitored and supervised.
The ETF structure will boost bitcoin accessibility for institutional investors who are often barred from alternative asset investments.
How Is This Different Than Current Bitcoin Futures ETFs?
The SEC approved Bitcoin futures ETFs in 2021. This tracks agreements for buying or selling Bitcoin at a certain pre-agreed price.
The problem is these products can’t track price fluctuations precisely. The cost of rolling over these contracts tends to eat into the returns, making them less desirable for some investors.
A New Outlook for Investors
For years, there was hesitancy from institutions like BlackRock to enter the bitcoin market. This was due to ambiguous accounting standards and a lack of clear legislation.
The new addition of spot ETF and SRC approval opens the doors wider for bitcoin investment, allowing firms to offer bitcoin exposure to a wider array of clients. This new confidence centers around the fact that ETFs are standard financial instruments with greater clarity and regulation around their management.
The spot ETF approval is a way to democratize access to cryptocurrency. Previous Bitcoin purchases required some degree of technical ability, which hindered the widespread adoption of this cryptocurrency.
Now, every ETF has its own ticker and is available to trade like other equities on the stock market. This offers investors exposure to Bitcoin without significant technical know-how.
Bitcoin can now be added to IRAs, pension funds, and 401(k)s through money managers and investors. This is a huge money-making opportunity that bitcoin advocates have been pushing for.
A Look to the Future
ETF approval is a positive step for Bitcoin and the cryptocurrency market as a whole. In the years to come, ETFs are likely to grow in popularity as more investors begin to seek the financial benefits that bitcoin can add to their portfolios.
This enthusiasm isn’t going to happen overnight but will likely be a gradual process.
Invest in Bitcoin Today
The news is out, and it is big. The SEC approved spot ETFs, and this opens the door for more investors and easier access to bitcoin. Bitcoin ETF approval offers more protection and less hassle for those interested in crypto investments.
At True Code Capital, we believe that crypto investment provides the opportunity to participate in the greatest wealth creation of our generation. And we want to help you invest with confidence.
Contact True Code Capital today to see the difference cryptocurrency investment can make for your financial future.
